An EFS transaction allows market users to trade futures contracts for qualifying swap agreements, providing a direct link between the Exchange-traded contract markets and the product cash markets. EFS transactions are now possible in all of NYBOT's agricultural markets due to amendments to existing Coffee, Sugar and Cocoa Exchange, Inc. (CSCE) and New York Cotton Exchange (NYCE) rules. The new rules, which recently became effective, define criteria and administrative procedures to be followed for a transaction to qualify under the rules.
"Our 'Exchange for Swaps' capability provides our market users with a new and useful trading tool," said Mark D. Fichtel, President and CEO of NYBOT. "This first transaction demonstrates the potential of strengthening relationships between our core markets and the underlying industries."
A swap is a contractual agreement in which two parties agree to make periodic payments to each other. Swap contracts are tailor-made to meet the needs of the individuals involved and trading in an over-the-counter (OTC) type environment. Commodity swaps are structured much like interest-rate swaps: one party pays a floating price for a commodity and the other pays a fixed price for the commodity. The physical commodity is not actually exchanged. Payment flows are limited to the difference between the floating price and the fixed price.
Prior to NYBOT allowing EFS transactions, a market user who had entered into both a swap transaction and a futures position, and who wished to unwind both strategies, had to do so separately. The new EFS transaction capability will allow this trade to be done in a single maneuver, providing users with a more efficient mechanism for unwinding their positions.
Cargill Investor Services (CIS) is a leading independent futures, options and OTC broker offering clearing, execution and related client services to institutional customers. All CIS services build on a global technology platform designed to provide customer solutions based on speed and reliability.
NYBOT is the parent company of the CSCE and the NYCE. Through its two exchanges and their subsidiaries and divisions, including the New York Futures Exchange (NYFE), FINEX, and Citrus Associates, NYBOT offers a wide
