Exchange for Physical (EFP)
European Union Electricity Market Glossary

 


 

 


"Exchange for Physical" (EFP) means a transaction in a derivative contract or other financial instrument contingent on the simultaneous execution of an equivalent quantity of an underlying physical asset (Article 2(1)(48) MiFIR).

 

According to Recital 14 of the Commission Delegated Regulation (EU) 2017/583 of 14 July 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards on transparency requirements for trading venues and investment firms in respect of bonds, structured finance products, emission allowances and derivatives exchange for physicals are an integral part of financial markets, allowing market participants to organise and execute exchange-traded derivatives transactions which are linked directly to a transaction in the underlying physical market.

 

They are widely used and they involve a multitude of actors, such as farmers, producers, manufacturers and processors of commodities.

 

Typically an exchange for physical transaction will take place when a seller of a physical asset seeks to close out his corresponding hedging position in a derivative contract with the buyer of the physical asset, when the latter happens to also hold a corresponding hedge in the same derivative contract.

 

They therefore facilitate the efficient closing out of hedging positions which are not necessary anymore.

 

 

 

Recital 14 of the Commission Delegated Regulation (EU) 2017/583 of 14 July 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards on transparency requirements for trading venues and investment firms in respect of bonds, structured finance products, emission allowances and derivatives

 

Exchange for physicals are an integral part of financial markets, allowing market participants to organise and execute exchange-traded derivatives transactions which are linked directly to a transaction in the underlying physical market. They are widely used and they involve a multitude of actors, such as farmers, producers, manufacturers and processors of commodities. Typically an exchange for physical transaction will take place when a seller of a physical asset seeks to close out his corresponding hedging position in a derivative contract with the buyer of the physical asset, when the latter happens to also hold a corresponding hedge in the same derivative contract. They therefore facilitate the efficient closing out of hedging positions which are not necessary anymore.

 

 

 

Questions and Answers on MiFID II and MiFIR transparency topics, ESMA70-872942901-35

Non-equity transparency

 

Question 4c [Last update: 03/10/2017]

 

When does an investment firm apply the systematic internaliser obligations on a package order level?

 

Answer 4c

 

For pre-trade transparency obligations to apply at package order level, including for an exchange for physical, an investment firm must be a systematic internaliser in all financial instrument components of the order. Where an investment firm is prompted for a quote for a package order for which it is a systematic internaliser only for some components, the investment firm can decide either to provide a firm quote for the whole package or only for the components for which it is a systematic internaliser.

 

 

 

 

IMG 0744

    Documentation    





 

MiFIR, Article 2(1)(48)

 

Commission Delegated Regulation (EU) 2017/583 of 14 July 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards on transparency requirements for trading venues and investment firms in respect of bonds, structured finance products, emission allowances and derivatives, Recital 14


Questions and Answers on MiFID II and MiFIR transparency topics, ESMA70-872942901-35, Non-equity transparency, Question 4c


 

 

 

 

clip2

    Links    

 

 

 

 

 

 

Advertisements


 

 

 

 

 

 

 

 

Last Updated on Thursday, 19 October 2017 20:40
 

Search

Copyright © 2009 - 2017 Michal Glowacki. All rights reserved.
The materials contained on this website are for general information purposes only and are subject to the disclaimer