when two parties have agreed to an exchange of futures for physicals they then register the transaction with the relevant exchange exchange of futures for physical is also referred to as exchange of futures for product and exchange of futures for cash as in cash commodity 
the term exchange of futures for physical is generally used to describe transactions of this nature even when the underlying are financial products rather than cash commodities exchange of futures for swap efs can be used if the futures position is being traded for a swap contract example of exchange of futures for physical efp the most common examples of exchange of futures for physical are in the oil and gas sector this makes sense as these types of transactions are not done by small traders and speculators efps will usually involve large commercial and non commercial traders imagine an oil and gas producer is holding an inventory of one million barrels on the assumption that prices are trending up a refiner that is worried about prices going up wants to secure barrels of oil in the future so they buy 1 000 contracts each representing a contract unit of 1 000 barrels for a total of one million barrels the refiner and the producer get to talking and they realize that a they are both bullish on the price of oil and b they can switch positions to fulfill each other s needs they agree to a price and delivery date in the future where the producer hands over the physical oil to the refiner locking in the refiner s supply and receives the futures in return allowing the producer to continue the bullish position on oil prices this large transaction is registered with the exchange but it doesn t impact the price of oil because pricing information is not disclosed so the refiner has closed out a futures position and the producer has opened one benefits of exchange of futures for physical efp the obvious question is why not just do the transaction through the market the answer is simply for the sake of efficiency large transactions impact the market as they are executed this is why large traders sometimes break up transactions over time to reduce the impact of slippage doing the exchange of futures outside the market pricing mechanism allows large offsetting transactions to take place at a decided price efp is also used when the market depth is not able to absorb the transaction for example a transaction involving thousands of contracts 