Skip to main Content
Site Search

Advanced Search

  • Mondo Visione
  • Mondo Visione - Worldwide Exchange Intelligence
Member Login

Member Login

Forgotten your password?

CBOT To Expand Exchange-for-Risk ( EFR) Pilot Program

Date 19/12/2002

In a move designed to strengthen the exchange's competitive position by making commodity futures as useful as possible to participants in the over-the-counter (OTC) markets, the Chicago Board of Trade (CBOT ), the world's largest agricultural commodity exchange, announced today that it will expand its existing Exchange-for-Risk (EFR) pilot program, currently comprised of CBOT rice and oats contracts, to include CBOT wheat contracts, effective January 2, 2003.

CBOT Chairman Nickolas J. Neubauer said, "Today's market participants are using very savvy and sophsicated trading techniques in the cash and futures markets. With the expansion of the CBOT's EFR transactions, this program will make it easier for OTC market participants to use the CBOT's agricultural futures to manage their price risk, which should attract end users to our futures markets and enhance our deep pool of liquidity."

An EFR is made up of two related transactions, an OTC transaction and a futures transaction. The EFR transaction involves the exchange of futures contracts for a related OTC contract in much the same way that futures are exchanged for physical commodities in a traditional EFP (Exchange For Physical). OTC derivatives that are eligible for the EFR transactions are contracts executed outside the regulated exchange environment whose value is dependent on or derived from the value of the underlying commodity.

The counter-parties to the EFR must be under separate control and the buyer or seller of the futures contract must be the seller or buyer of the OTC contract. The EFR transactions are executed ex-pit, in a similar manner to Exchange For Physical transactions.

Responding to requests from customers, the CBOT first implemented EFR transactions in its oats and rice markets in September 2002. The introduction of this new transaction type benefits CBOT customers by providing a more efficient risk management tool for the growing OTC market.