Two institutional investors completed the first-ever exchange for physical (EFP) transaction involving bitcoin futures. The CME EFP bitcoin transaction, facilitated by ED&F Man Capital Markets, a registered futures commission merchant, and itBit, an institutional-grade cryptocurrency exchange, saw two institutional traders swap a position in CME’s bitcoin futures market for an equivalent amount of the physical asset itself.
Wall Street traders use EFPs to hedge their futures positions and diversify their exposure to specific assets. They may also provide firms with leverage, capital, tax, and liquidity benefits. EFP transactions are negotiated off-exchange, often with the assistance of a broker, and then reported to the exchange for settlement. While common in commodities trading, itBit and ED&F Man said that this transaction marked the first time that an EFP has been reported to a US futures exchange where the underlying physical asset was a cryptocurrency.