A notable event, which may soon lead to a large-scale acceptance of Bitcoin as a pecuniary tool, took place the present week. As reported, two institutional investors have been able to successfully accomplish a first-hand EFP (exchange for physical) transaction, involving bitcoin futures.
The CME EFP Bitcoin transaction is assisted by the ED&F Man. Capital Markets Limited, a firm that provides security trading and brokerage services, along with itBit, an institutional-grade digital-asset exchange platform, marked this event. The two institutional backers interchanged a position in CME’s Bitcoin futures market for an identical sum of the “physical” asset itself.
The merchants associated with Wall Street generally tend to bring EFPs to use for the purpose of safeguarding their futures positions and widening their exposure to certain assets. They may also furnish the organisations with a number of leverage, capital, liquidity and tax benefits.
The functionality of EFP transactions includes a settlement, which is generally made off the platform along with the involvement of an intermediary and is then set forth the platform for the final agreement.
It has been agreed upon by both, itBit and ED&F Man Capital Markets Limited, that it was the first time ever an EFP transaction had been reported to a U.S. futures exchange where the physical asset in question was a digital token.
Brooks Dudley of ED&F Man Capital Markets Inc., made a statement on the deal, wherein, he too accepted that this might serve as a significant step for the acceptance of Bitcoin as a regulated digital token.
“Every day we facilitate EFPs for our clients in physical assets such as soybeans, wheat, and treasuries. EFPs on CME Bitcoin futures mark an important step forward in the maturity of the regulated derivatives market for digital currencies.”
Additionally, the director of itBit’s digital-asset trading desk, Paul Ciavardini, says that the cryptocurrency ecosystem will be able to function smoothly if institutional solutions such as EFP trades are continuously introduced.
As of now, the U.S. Commodity Futures Trading Commission (CFTC) has given consent only to bitcoin futures products that are cash-settled. In other words, the traders will be able to encash Bitcoin once the validity of the contract is ceased. The trade is, therefore, of a great significance from this point of view.
The accessibility of EFPs, however, will furnish the market with a more flexible way of interaction with the nascent asset class.