The Exchange for Risk ("EFR") concept is similar to an exchange of futures for cash commodities ("XCFO or EFP"). EFR transactions involve the exchange of futures for over-the-counter ("OTC") derivatives, and XCFO transactions involve the exchange of futures for cash commodities.
Greg Edelblute, KCBT Chairman, said the rule changes are in response to customer needs as people in the industry begin to use more sophisticated marketing techniques using over-the-counter derivatives.
"The EFR rules are intended to provide a more efficient mechanism for dealing with futures positions in connection with the unwinding of OTC contracts," Edelblute said. "This should encourage more OTC contract participation involving KCBT products and more exchange contract volume through the risk management of such OTC products, therefore providing increased liquidity at the exchange."
"We believe our customers will be very pleased with this rule change," said Eric Bowles, Vice President, Macquarie Americas Corp. "The 'Exchange for Risk' (EFR) ruling will enable them to have the desired underlying futures position at the expiry of the Over-the-Counter transaction. It also clearly demonstrates the nexus between the Kansas City Board of Trade and the fast growing Over-the-Counter market."
The new rules become effective on Monday, Aug. 5, 2002.
The Kansas City Board of Trade, chartered in 1876, is the world's largest futures market for hard red winter wheat.
