Bank One Corporation - Page 195

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                         e.  Need for Strong Credit                                   
               With the evolution of the interest rate swaps market,                  
          intermediaries could during the relevant years do far more deals            
          if they were willing to offer themselves as counterparties.                 
          Major commercial banks, as compared to investment banks, were               
          more highly capitalized and were more willing to assume the                 
          credit risks inherent in acting as a counterparty.  The                     
          importance of credit risk was a factor during the relevant years            
          in the dominance of commercial banks as dealers; e.g., 16 of the            
          world’s 20 largest swaps dealers in 1993 were commercial banks.             
          A dealer with a weak credit rating in the swaps market was hurt             
          in its ability to enter into swaps.                                         
                    3.  Brokers                                                       
               Swap brokers do not take a position or act as a principal in           
          a swap transaction, and they do not maintain any exposure with              
          respect to a swap.  Swap brokers simply arrange for dealers to              
          enter into interdealer swaps by matching dealers who want to                
          effect a particular swap with other dealers who want to effect a            
          similar swap.  The clientele of a swap broker is limited to                 
          dealers; e.g., an end user may not use the services of a broker             
          unless the end user is a recognized dealer in the interbank                 
          market.  A swap broker is paid a standard fee for its services              
          based on a percentage of the notional principal amount.                     








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