Institutional Investors Completed the First Exchange for Physical EFP Transactions
This week, bitcoin has made an important step towards becoming the main financial instrument. The fact is that two institutional investors completed the first exchange for physical transactions (EFP), using bitcoin futures.
In the transaction CME EFP Bitcoin, which was conducted by ED&F Man Capital Markets and registered by the trading agency for futures contracts, and itBit - institutional cryptocurrency exchange, it was observed that both institutional traders exchanged positions in the futures market for the equivalent amount of the "physical" asset.
Traders from Wall Street use EFP to hedge their futures positions and diversify their impact on specific assets. They can also provide companies with credit, capital, taxes and liquidity benefits. In this case, EFP-transactions are discussed outside the exchange, often with the assistance of brokers. Later they are transferred in exchange for a settlement.
Despite the fact that they were common in commodity trading, ED & F Man Capital Markets and itBit noted that this transaction was marked for the first time, when EFP is reported for futures exchange in the US, where the cryptocurrency is the main physical asset.
Commenting on the trade, Brooks Dudley of ED & F Man Capital Markets noted that this is a serious step in the issue of the maturity of the cryptocurrency bitcoin, as a regulated asset.
In his turn, Paul Giavardini added that the solutions of the institutional type allow "to reduce friction" in the cryptocurrency market.
Trade is also interesting because the US Commodity Futures Trading Commission (CFTC), until now, approved only futures products based on bitcoin, which were cash. This suggests that investors could receive the cash value of Bitcoin only when the contract expired, not the physical asset. Availability of EFP will provide a greater level of flexibility in the issue of interaction with this asset class.