During the course of this week, Bitcoin took a bold step toward becoming a mainstream financial instrument, as two institutional investors finished the first-ever exchange for physical (EFP) transaction including bitcoin futures.
The CME EFP Bitcoin transaction enabled by E D & FF Man Capital Markets, a registered futures commission merchant and itBit, an institutional-grade cryptocurrency exchange, witnessed two institutional traders change a position in CME’s bitcoin futures market for an equal amount of the “physical” asset itself.
Wall Street traders make use of EFPs to hedge their futures positions and increase their exposure to certain assets. Additionally, they offer companies with leverage capital tax and liquidity gains. EFP transactions are discussed off-exchange, normally with the help of a broker, and then reported to the exchange for a settlement.
Even though it is usual in commodities trading, itBit and E D F & Man noted that this transaction signifies the first instance that an EFP has been reported to a U.S. futures exchange where the fundamental physical asset was a cryptocurrency.
Talking on the trade, Brooks Dudley, of E D & F Man Capital Markets Inc., noted that is signified a vital 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 if itBit’s over-the-counter (OTC) cryptocurrency trading desk, explained that institutional solutions including EFP trades will “continue to reduce the friction” in the cryptocurrency marketplace.