On August 8, ICE Futures U.S. revised its rule and frequently asked questions related to exchange of futures for related position (EFRP) transactions. The amendments codify the requirements regarding the simultaneous transfer of a cash market commodity or legally binding contract between the parties. The revisions also prohibit EFRP transactions that are contingent upon execution of a second EFRP or related position transaction but continue to allow inventory financing arrangements in which one party to an EFRP transaction grants its counterparty the nontransferable right—but not the obligation—to effectuate a second transaction reversing the original EFRP. The amendments also prohibit EFRP transactions between commonly controlled accounts with different beneficial owners.The revisions expressly provide that an immediately offsetting EFRP transaction is not permitted in any product other than foreign currency. The rules will continue to permit commodity trading advisors and other account controllers to transact in the foreign currency market as principals, but with the added condition that the account controller produce to the exchange, upon request, an agreement or other document substantiating that the risk of loss on the cash or over-the-counter component would be borne by the customer of the account controller if the EFP were void as a consequence of the futures leg not clearing.
The amendments requiring account controllers to produce documentation regarding immediately offsetting EFRPs and the risk of a failed EFRP will become effective October 1. The other amendments will become effective on September 5.
The rule filing is available here.