Be Excited, Very Excited!

Institutional Investors Swap Bitcoin Futures for Physical BTC in Wall Street First

Wall Street

Bitcoin took a significant step toward becoming a mainstream financial instrument this week, as two institutional investors completed the first-ever exchange for physical (EFP) transaction involving bitcoin futures.

The CME EFP Bitcoin transaction, facilitated by E D & 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 E D F & Man said that this transaction marked the first time that an EFP has been reported to a U.S. futures exchange where the underlying physical asset was a cryptocurrency.

Commenting on the trade, Brooks Dudley, of E D & F Man Capital Markets Inc., said that it marked an important step in the maturation of bitcoin as a regulated asset:

“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.”

Paul Ciavardini, director of itBit’s over-the-counter (OTC) cryptocurrency trading desk, added that institutional solutions such as EFP trades will “continue to reduce the friction” in the cryptocurrency marketplace.

The trade is also noteworthy because, as CCN reported, the U.S. Commodity Futures Trading Commission (CFTC) has thus far only approved bitcoin futures products that are cash-settled, meaning that investors receive the cash value of bitcoin when a contract expires, rather than the physical asset itself. With the availability of EFPs, they will have more flexibility in how they interact with this nascent asset class.

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About Howard Mahere

I'm a Bitcoin/Cryptocurrency enthusiast ; motivator; author of "AN IMMIGRANT WITH A PLAN" and a John C Maxwell certified speaker . Happily married to Emely and a father to one son and two daughters. My greatest joy comes from inspiring others to maximize their potential. I feel fulfilled when I bring hope to the hopeless and encouragement to the discouraged. The truth is, we each have a past, and it's either our prison, our excuse OR our springboard to a brighter future. The choice is yours but as for me, I made up my mind a long time ago to use my dysfunctional tough childhood as a stepping stone . The late Zig Ziglar used to say "It's not what happens to you that determines how far you will go in life, it is how you handle what happens to you." This is my story and I am sticking to it!
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