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floating rate in a foreign currency, or exchanging a floating
rate in a foreign currency for a floating rate in U.S. dollars.
E. Participants in the Market
The main participants in the interest rate swaps market are
end users, dealers, and brokers.
1. End Users
a. Typical End Users
End users are typically major corporations, government or
governmental-related entities, investment funds, or other
financial institutions. These end-users typically use interest
rate swaps to combat interest rate movements, express market
preferences through position taking, and/or reduce their cost of
funding. As to the size of an end user, swaps end-user entities
entering into swaps in connection with the conduct of their
business must have assets over $10 million or a net worth over $1
million in order to qualify their swaps for a safe-harbor
exception from most of the regulatory requirements of the
Commodity Futures Trading Commission (CFTC).15
15 A swap must also meet three other requirements in order
to qualify for such an exception. First, the swap may not be
part of a fungible class of agreements which are standardized as
to their material economic terms. Second, the creditworthiness
of any party having an actual or potential obligation under the
swap agreement must be a material consideration in entering into
or determining the terms of the swap agreement. Third, the swap
agreement may not be entered into or traded on a physical or
electronic transaction execution facility in which participants
can simultaneously effect transactions and bind both parties.
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