-37-
restrictions,18 nonstandardized terms, the requirement of bearing
the credit risk of a specific counterparty, and the ability to
buy out a swap at the going market rate, a liquid secondary
market for the assignment of swaps has never developed. When
swaps were sold before maturity, e.g., when a portfolio of swaps
was sold by one dealer to another, the terms were not publicly
available.
2. Brokers’ Dissemination of the Dealers’ Quotations
a. Daily Quotations
During the course of each business day, swap brokers would
contact a large number of swaps dealers (including FNBC) and
request their bid and ask quotes on several plain vanilla swaps.
These swaps were commonly quoted on the convention of semiannual
payments and on the basis of the 6-month LIBOR floating rate and
had standard maturities of 1, 2, 3, 5, 7, and 10 years. These
quotations (as well as the midmarket swap curve (discussed infra
p. 43) assumed that the counterparty was a dealer with a credit
18 For example, a swap may be assigned only upon the consent
of both parties thereto.
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