-38-
rating of AA.19 No service reported regular and reliable quotes
on swaps negotiated with lower rated counterparties.
Upon receiving these quotations from the dealers, the
brokers disseminated publicly the best interdealer price
quotations by way of electronic broker quotation services such as
Bloomberg, Reuters Monitor Money Rates Service, or Associated
Press/Dow Jones Telerate Service. These services, to which swaps
dealers had access on their “dealer screens”, normally made it
unnecessary for a dealer to shop around when the dealer wished to
enter into a swap transaction because the dealer knew that the
quoted rate was a competitive price. If a dealer wanted to enter
into a specific swap, the dealer could contact a broker, and the
broker would call one or more dealers and confirm their quotes on
the specified swap. The broker then reported back to the first
dealer (the one wanting to enter into the particular swap) on the
best quote that the broker had obtained. If that dealer
ultimately entered into a swap agreement with another dealer
supplied by the broker, the broker received a fee for its
services based on a percentage of the notional amount.
19 Participants in the swaps market generally rated
counterparties using standard credit ratings obtained from
private credit rating agencies such as Moody’s and Standard &
Poor’s (S&P). Each agency had its own set of ratings. The
ratings offered by S&P for long-term debt were (from best to
worst) AAA, AA+, AA, AA-, A+, A, A-, BBB+, BBB, BBB-, BB+, BB,
BB-, B+, B, and B-. (For clarity, we refer only to the S&P
ratings.) In 1992, most swaps dealers had a credit rating of A
or better, and many of those dealers had ratings of AA or AAA.
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