What an EFP Does
An EFP lets a trader exchange a futures position for a physical position, or the reverse, in a single off-exchange transaction that is then registered with the exchange. A dealer short COMEX futures but holding London bars can swap the futures against the physical, flattening both books at once. The quantities match the contract — 100-ounce multiples — and the two legs are priced in the same negotiation.
EFPs are a wholesale tool. The users are bullion banks, refiners, and large dealers managing inventory and hedges across the two biggest gold markets in the world. Retail traders almost never execute one, but everyone who trades gold futures lives with its effects on pricing and spreads.
Why the EFP Exists
London is the center of physical gold trading; COMEX is the center of gold price discovery in futures form. Anyone hedged in one market and exposed in the other needs a way to move risk between them without trading in the open market and moving prices. The EFP is that bridge, and enormous volumes cross it.
It also underpins delivery logistics. When futures holders stand for delivery, dealers use EFPs to source or place metal efficiently, shipping between London vaults and COMEX-approved depositories as pricing dictates. Because the swap happens off the order book, it does not disturb the quoted market the way a large outright trade would.
What the EFP Spread Tells You
The EFP spread is quoted as futures minus spot, and in calm markets it tracks financing and transport costs — usually a modest, stable number. When that spread blows out, something is wrong with the plumbing. In March 2020, pandemic logistics stranded physical metal and the futures-spot spread widened dramatically. In early 2025, tariff fears pulled metal into New York and distorted the spread again.
- Widening spread. Signals stress in moving metal, strong US delivery demand, or dislocation between the markets.
- Normal spread. Signals the arbitrage bridge is functioning.
You cannot trade the EFP directly from a retail account, but watching it explains futures-spot dislocations that would otherwise look like a free lunch. As always, futures trading involves substantial risk of loss and is not suitable for all investors.