What is efp?

EFP stands for Exchange for Physicals, which is an agreement between two traders to exchange futures contracts for the underlying physical assets. These transactions are usually done off-exchange or over-the-counter and are commonly used in the commodity market.

For example, a trader who owns a futures contract for crude oil can exchange it for actual barrels of oil through an EFP agreement with another trader. This allows the trader to avoid delivery costs and complications associated with settling a futures contract.

EFPs are used for various commodities, including energy, metals, agriculture, and livestock. They are also used for financial instruments, such as bonds and currencies.

EFP trades are typically executed by a broker or an exchange, and they require both parties to agree on the terms of the exchange, such as the quantity of the underlying asset and the delivery location.