EFS transactions were introduced in the natural gas futures market on October 31, 2001.
Exchange President, J. Robert Collins, Jr., said, "The EFS transactions marked the start of the exchange expanding the flexibility of its instruments to provide added protection to the energy markets. These transactions were a precursor to the clearing services introduced in May for off-exchange trades and the new electronic trading platform we will introduce tomorrow. The volume of these transactions is yet another indication of the flight to quality that has occurred in energy markets over the past year-and-a-half."
EFS transactions are similar to exchange of futures for physical (EFP) transactions. Two parties are allowed to privately negotiate the execution of an integrated over-the-counter swaps and related futures transaction on pricing terms agreed upon by the involved parties. The transaction must involve approximately equal but opposite side-of-market quantities of futures and swap exposures in the same or related commodities and are permitted until two hours after trading terminates in the underlying futures contract. The transactions are permitted to liquidate, initiate, and transfer futures market positions between the two parties involved in the transaction.
