-36-
F. Market for Swaps
1. Types of Markets
a. Primary Market
Interest rate swaps are transacted in the over-the-counter
(OTC) market. That market is highly competitive and includes
many active dealers. Throughout the relevant years, the primary
market for plain vanilla U.S. dollar interest rate swaps between
counterparties of relatively good credit quality was liquid and
as active, deep, and competitive as almost any other market. The
fact that there was an active primary market in benchmark swaps
made it possible for potential counterparties to shop around
quickly for competitive terms for an interest rate swap and agree
on the swap’s value. The appropriate range of terms for a large
interest rate swap between high-quality counterparties was at
least as transparent and easily determined at a moment’s notice
as was the appropriate price for a comparatively large position
in the most liquid equities traded on major U.S. stock exchanges.
b. Secondary Market
No active secondary market exists for swaps, other than in
the case of buyouts (which occur by number of swap transactions
approximately 10 percent of the time in the interbank market) and
to a much lesser extent, assignments. Because of contractual
Page: Previous 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 NextLast modified: May 25, 2011