The following two criteria for equivalence of exposures are accepted in EFP transactions: basis point value equivalence g and face value equivalence . The basis point value equivalence principle applicable to all physicals and related positions requires that the basis point value (DV01) of the futures must be approximately equivalent to that of the bonds (or bond forwards) in terms of absolute value, but be opposite in sign to the latter. The face value equivalence principle is only applicable to EFP transactions involving deliverable Chinese government bonds as physicals.
For an EFP transaction involving multiple physicals, the basis point value should be the sum of the basis point value of all cash bonds; and the face value should be the sum of the face value of all cash bonds.
CFFEX will examine the equivalence of exposures from the futures and physical legs of an EFP transaction on Chinese government bond futures and in case of a big deviation of the exposure matching degree reported by the client from that calculated by CFFEX, will require further explanation from the client and take actions, as appropriate, to address the issue.