Menu Close

Exchange for Risk (EFR) Definition

Definition

The word Exchange for Risk identifies some privately negotiated trade between the market of a futures contract position for an corresponding Over the Counter exchange or tool. Exchange for Risk is really one of the Exchange for Related Positions (EFRP) trades.

Explanation

An Exchange for Risk (EFR) is just one of the Exchange for Related Positions trades authorized under Rule 538. An EFR requires the market of a futures contract position for an corresponding OTC tool. In order to run this trade:

  • The buyer (seller) of this OTC tool must likewise be the client (seller) of this futures contract.
  • The total amount of this OTC device has to be roughly equivalent to the futures contract.
  • The OTC tool should demand the exact underlying asset, or perhaps a by product of this advantage, given from the futures contract.

The different licensed EFRP trades incorporate Exchange for Physical (EFP), Exchange of Options for Options (EOO) and Exchange for Swap (EFS).