EFP Trading
An Exchange for Physical (EFP) allows the exchange of a long or short stock position for a security future. Buying the EFP is buying the security future and selling the underlying, selling the EFP is selling the future and buying the underlying. The theoretical implied EFP interest rate is calculated with the following basic formula, ((Futures-Cash+Dividend)/Stock price)/(days left to expiration/360).
EFP transactions at OneChicago are executed or reported via OCX.BETSTM (Block and EFP Trading System). OCX.BETSTM is a standalone OneChicago application that supports a competitive anonymous marketplace for EFP transactions in addition to an EFP reporting mechanism for EFP trades that are privately negotiated between two counterparties. EFP quotes on OCX.BETSTM are in four decimal point basis pricing which aids in aligning EFP pricing with the desired interest rate for the trade. OCX.BETSTM EFP markets can be viewed at http://www.onechicago.com?page_id=812. Market participant interested in trading in OneChicago’s EFP marketplace via OCX.BETSTM should contact OneChicago operations at 312.424.8524 or via email at operations@onechicago.com.
EFPs can be book traded (point and click) from 8:30-3:00 for SSFs and NBIs, 8:30-3:15 for ETFs, bi-lateral voice brokered EFPs can be reported from 8:00-4:00 for SSFs, ETFs and NBIs.
OCX.BETSTM provides straight through processing of both the single stock future (SSF) and the underlying stock for book matched EFPs by directly reporting the stock leg execution to the NASDAQ ACT/TRF and the single stock future to clear through the OCC.
EFP Transaction Prerequisite
Prior to executing Exchange of Futures for Physical (EFP) transactions, firms must file a registration list of Authorized Block/EFP Trade Reporters with OneChicago. See Authorized Trade Reporter Form for Block/EFP TradesThis list must be signed and submitted by a Responsible Trader (See OneChicago Rule 513).
Procedures
1. EFPs are transacted or reported using the OneChicago OCX.BETSTM (Block and EFP Trading System) system. OCX.BETSTM fulfills the requirement to complete an EFP Transaction Report in a form and manner approved by the Exchange. If the transaction is an EFP that is only reported on OCX.BETSTM, i.e., a bi-lateral transaction, then one of the traders must enter the information into OCX.BETSTM and the counter-party trader must confirm the transaction on OCX.BETSTM.
2. The Parties to an EFP must compile and retain accurate records of the associated physical asset transfer for audit purposes.
3. Requests for breaking or busting EFP trades will be considered a serious matter. In determining whether or not to bust an EFP, OneChicago may consider factors including but not limited to the size of the initial report, the variation of the price from the market price at the time of the report, the length of time that has transpired from the trade report and the market impact of the initial report. Fees may be levied to discourage erroneous reports and bust requests.