Investors Swapping Bitcoin Futures for Physical BTC in Wall Street

Investors Swapping Bitcoin Futures for Physical BTC in Wall Street

With the increase in the value of Bitcoin to over $8000, two Wall Street Institutional Investors have successfully completed the first-ever exchange of their investments in the CME’s Bitcoin futures market for an equivalent amount of the physical bitcoin asset in an EFP transaction. According to CCN, this transaction was facilitated by E.D & F Man Capital Markets, a registered futures commission merchant and itBit, an institutional grade cryptocurrency exchange.

The CME group defines EFPs as follows,

An Exchange for Physical (EFP) is a particular type of Exchange for Related Position (EFRP) transaction and may be executed in any CME equity index future in accordance with Rule 538 and any associated advisories.

EFP transactions allow the traders to optimize on their holdings to meet their leverage, tax, capital and liquidity needs and also to differentiate between the tool used for trading and how they want to hold their exposure. Put simply, in an EFP transaction, one party is the buyer of futures and seller of the physical share and the other party is just the opposite. It is a private transaction between the two parties involved, however, the fulfilled transaction must be reported to the Exchange.

While these transactions are common, this is the first time a cryptocurrency has been used as an underlying asset. The current expiration date of the CME Bitcoin Futures is Friday, July 27.

Brooks Dudley, from E.D & F Man Capital Markets Inc. commented on this EFP transaction.

Every day we facilitate EFPs for our clients in physical assets such as soybeans, wheat and treasuries. EFPs on CME Bitcoin futures mark an important step forward in the maturity of the regulated derivatives market for digital currencies.

As crypto markets mature, it is expected that EFP trades will become more common. Since the U.S. Commodity Futures Trading Commission (CFTC) has only approved BTC futures products settled using cash, the EFP transactions may provide more flexibility to Wall Street.

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Pallavi Janiani

Pallavi Janiani

Content Writer
I am studying Business and psychology at the university of Minnesota. Apart from learning about how the economy and the human mind works, I spend my time dancing with my bollywood fusion team, reading, writing, traveling, usually with a cup of coffee in my hand.