Swap Dealer

AAA

DEFINITION of 'Swap Dealer'

An individual who acts as the counterparty in a swap agreement for a fee called a spread. Swap dealers are the market makers for the swap market. The spread represents the difference between the wholesale price for trades and the retail price. Because swap arrangements aren't actively traded, swap dealers allow brokers to standardize swap contracts to some extent.

INVESTOPEDIA EXPLAINS 'Swap Dealer'

Historically, swaps have been traded in the over-the-counter market, mainly between firms and financial institutions, in largely unregulated transactions. In 2011, the SEC proposed requiring security-based swap dealers and participants to register with the commission, as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The swap market would be overseen by the SEC and the CFTC. Swap dealers would have to change their business models and more trades would occur via exchange-like mechanisms. The Wall Street Journal stated that the proposed regulations would increase competition among swap dealers and decrease their profits, increase market liquidity and make trading more efficient for customers.

RELATED TERMS
  1. Market-Maker Spread

    The difference between the price at which a market maker is willing ...
  2. Broker-Dealer

    A person or firm in the business of buying and selling securities, ...
  3. Swap Spread

    1. The difference between the negotiated and fixed rate of a ...
  4. Swap

    Traditionally, the exchange of one security for another to change ...
  5. Price Swap Derivative

    A derivative transaction in which one party guarantees a fixed ...
  6. Market Maker

    A broker-dealer firm that accepts the risk of holding a certain ...
Related Articles
  1. Insurance

    Credit Default Swaps: What Happens In A Credit Event?

    The credit crisis of 2008 prompted important changes to the settlement of credit default swaps.
  2. Options & Futures

    Careers In The Derivatives Market

    The growing interest in and complexity of these securities means opportunities for job seekers.
  3. Investing Basics

    The Barnyard Basics Of Derivatives

    This tale of a fictional chicken farm is a great way to learn how derivatives work in the market.
  4. Bonds & Fixed Income

    A Guide To Real Estate Derivatives

    These instruments provide exposure to the real estate market without having to buy and sell property.
  5. Bonds & Fixed Income

    Credit Default Swaps: An Introduction

    This derivative can help manage portfolio risk, but it isn't a simple vehicle.
  6. Options & Futures

    An Introduction To Swaps

    Learn how these derivatives work and how companies can benefit from them.
  7. Options & Futures

    Get To Know These Crucial US Options Market Regulations

    How are options regulated in the U.S and which organizations are involved in options market regulations?
  8. Investing

    How Swaptions Can Reduce Risk in Portfolios

    How can investing in Swaptions reduce risk in portfolios.
  9. Economics

    The Impact Of Ending The US Embargo On Cuba

    Many argue that ending the US embargo on Cuba will not only make US consumers happy, but also help the US economy and bring more freedoms to Cuba.
  10. Economics

    Popular Places Where U.S. Citizens Need A Visa

    A U.S. passport will get you into many countries, but not everywhere. Here's how to visit five of the most popular destinations that require visas.

You May Also Like

Hot Definitions
  1. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  2. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  3. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  4. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  5. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  6. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
Trading Center