Definition
The term Exchange for Swap refers to a privately negotiated trade involving the exchange of a futures position for a corresponding Over the Counter swap. Exchange for Swap is one of several Exchange for Related Positions (EFRP) transactions. to put this in simple words, Exchange for Swap refers to exchanging one item for another, often in the context of financial instruments or cash flows. Swap-Free Forex Brokers, on the other hand, offer trading accounts without swap fees, which are fees charged on positions held overnight. Traders who hold positions for longer periods may prefer swap-free accounts to avoid these fees.
Explanation
An Exchange for Swap (EFS) is one of several Exchange for Related Positions (EFRP) trades authorized under Rule 538. An EFS involves the exchange of a futures position for an Over the Counter (OTC) swap involving the same underlying commodity. In order to conduct this transaction:
The buyer (seller) of the OTC swap must also be the buyer (seller) of the futures contract.
The quantity of the OTC swap must be approximately equal to the futures contract.
The OTC swap should involve the same underlying asset specified in the futures contract as well as the same contract month.
As is the case with other types of EFRPs, the transaction occurs as a privately negotiated exchange in positions. The other authorized EFRP trades include Exchange for Physical (EFP), Exchange of Options for Options (EOO), and Exchange for Risk (EFR).
Related Terms
- The term exchange traded fund refers to shares issued by a financial institution that allow investors to trade in benchmark indices. Exchange traded funds may include a variety of assets such as stocks, bonds as well as commodities.
Moneyzine EditorSeptember 20th, 2023 
The term Exchange of Options for Options refers to a privately negotiated trade involving the exchange of a futures position for a corresponding OTC option. Exchange of Options for Options is one of several Exchange for Related Positions (EFRP) transactions.Moneyzine EditorNovember 6th, 2024
The term Exchange for Risk refers to a privately negotiated trade involving the exchange of a futures position for a corresponding Over the Counter swap or instrument. Exchange for Risk is one of several Exchange for Related Positions (EFRP) transactions.Moneyzine EditorJanuary 17th, 2024
The term Exchange for Physical refers to a privately negotiated trade involving the exchange of a futures position for the actual physical asset. Exchange for Physical is one of several Exchange for Related Positions (EFRP) transactions.Moneyzine EditorJanuary 17th, 2024
The term exchange certified stocks refers to the quantities of commodities that have been certified as meeting the quality standards and deliverability by the exchange. Exchange certified stocks will be stored at delivery points designated as acceptable under the futures contract.Moneyzine EditorNovember 6th, 2024
