Exchange for Swap (EFS)

Definition

The term Exchange for Swap refers to a privately negotiated trade involving the exchange of a futures position for a corresponding Over the Counter swap. Exchange for Swap is one of several Exchange for Related Positions (EFRP) transactions.

Explanation

An Exchange for Swap (EFS) is one of several Exchange for Related Positions (EFRP) trades authorized under Rule 538. An EFS involves the exchange of a futures position for an Over the Counter (OTC) swap involving the same underlying commodity. In order to conduct this transaction:

  • The buyer (seller) of the OTC swap must also be the buyer (seller) of the futures contract.
  • The quantity of the OTC swap must be approximately equal to the futures contract.
  • The OTC swap should involve the same underlying asset specified in the futures contract as well as the same contract month.

As is the case with other types of EFRPs, the transaction occurs as a privately negotiated exchange in positions. The other authorized EFRP trades include Exchange for Physical (EFP), Exchange of Options for Options (EOO), and Exchange for Risk (EFR).

Related Terms

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