An Exchange of Futures for Physical (EFP) is a private agreement between two parties to trade a futures position for the basket of underlying actuals. The most common use of an Exchange of Futures for Physical (EFP) is to avoid taking delivery of the physical commodity.For example, if I am long crude oil futures and want to get out of that position without having to take possession of the physical oil, I can enter into an Exchange of Futures for Physical (EFP) with another party. This party will then take my long crude oil futures position and give me their short position in the underlying physical oil. We would then settle up our positions by exchanging money based on the current market prices for each asset.
