Swaps Report Data Dictionary

Interest Rate

The interest rate asset class encompasses the underlying of any swap which is primarily based on one or more reference rates, such as swaps of payments determined by fixed and floating rates.

Credit

The credit asset class encompasses the underlying of any swap that is primarily based on one or more instrument of indebtedness, including without limitation any swap primarily based on one or more broad-based indices related to instruments of indebtedness and any swap that is an index credit default swap or a total return swap on one or more indices of debt instruments.

Foreign Exchange (FX)

The FX asset class includes only those transactions that involve the exchange of two different currencies on a specific date/s at a fixed rate that is agreed upon at the inception of the contract covering the exchange, as well as the reverse exchange of those two currencies at a later date and at a fixed rate that is agreed upon at the inception of the contract covering the exchange. This asset class includes cross-currency swaps.

Equity

The equity asset class encompasses the underlying of any swap that is primarily based on equity securities, including, without limitation, any swap primarily based on one or more broad-based indices of equity securities and any total return swap on one or more equity indices.

Other Commodity

The other commodity asset class encompasses the underlying of any swap not included in the credit, currency, equity or interest rate asset class categories, including, without limitation, any swap for which the primary underlying notional item is a physical commodity or the price or any other aspect of a physical commodity.

Fixed-Float

An agreement between two parties (known as counterparties) in which one party (the fixed rate payer) makes periodic payments (the fixed leg) to another party (the floating rate payer) based on a fixed rate of interest multiplied by a notional amount in exchange for receipt of periodic payments (the floating leg) based on a floating rate index multiplied by the same notional amount (in most cases) upon which the fixed rate payments are based. 

For example, Party A enters into a five-year agreement with Party B in which Party A makes quarterly payments to Party B of 0.4% times $10,000,000 (the notional amount) and Party B makes quarterly payments to Party A of the 3 Month USD LIBOR rate times $10,000,000. Fixed-Float Swaps are commonly used when one party has taken out a variable rate loan and wishes to swap the variable rate payments for fixed rate payments.

Fixed-Fixed

An arrangement between two counterparties in which both parties pay a fixed interest rate that they could not otherwise obtain outside of a swap arrangement; for example, if each counterparty uses a different native currency, but wants to borrow money in the other counterparty’s native currency. Fixed-fixed swaps generally take the form of a zero coupon swap and will generally appear as such in the CFTC Swaps Report.

Basis (or Float-Float)

An agreement between two counterparties in which one party makes periodic payments to another party based on a floating rate index multiplied by a notional amount in exchange for receipt of periodic payments based on a different floating rate index multiplied by the same notional amount upon which the floating rate payments are based. 

For example, Party A enters into a five-year agreement with Party B in which Party A makes quarterly payments to Party B of the 3 month Treasury Bill rate times $10,000,000 (the notional amount), and Party B makes quarterly payments to Party A of the 3 Month USD LIBOR rate times $10,000,000. Basis Swaps are commonly used when one party is active in two money markets and wishes to limit interest rate risk.

Inflation

An agreement between two counterparties in which one party (the fixed rate payer) makes periodic payments to another party (the floating rate payer) based on a fixed rate of interest multiplied by a notional amount in exchange for receipt of periodic payments based on an inflation rate index multiplied by the same notional amount upon which the fixed rate payments are based. 

For example, Party A enters into a five-year agreement with Party B in which Party A makes quarterly payments to Party B of 0.4% times $10,000,000 (the notional amount) and Party B makes quarterly payments to Party A of the Consumer Price Index (CPI) rate times $10,000,000. Inflation Swaps are commonly used when one party wishes to hedge against overall price increases in the market.

OIS (Overnight Indexed Swap)

An agreement between two counterparties in which one party (the fixed rate payer) makes periodic payments to another party (the floating rate payer) based on a fixed rate of interest multiplied by a notional amount in exchange for receipt of periodic payments based on an overnight rate index multiplied by the same notional amount upon which the fixed rate payments are based. 

For example, Party A enters into a one year agreement with Party B, in which Party A makes payments on a specific term to Party B of 0.15% times $10,000,000 and Party B makes monthly payments to Party A based on the average of the overnight Federal Funds rate over the previous month times $10,000,000. Firms commonly enter into OIS agreements when one party wishes to swap the payments on a loan based on fixed, short term rates, for payments based on a variable, overnight loan rate.

FRA (Forward Rate Agreement)

An agreement in which two counterparties agree to the interest rate (the forward rate) applying to a notional principal amount of an underlying money market rate index at a forward settlement date. One party (the buyer, or borrower) makes a payment to the other party (the seller, or lender) should the actual interest rate be below the agreed upon rate on the settlement date. In return, the seller agrees to pay the buyer should the actual interest rate be above the agreed upon rate on the settlement date. 

The payment is based on the difference between the agreed rate and the actual rate of the index, also called the settlement rate, a principal amount, and a period, or run, normally of 90 or 180 days. FRAs are generally quoted in terms of monthly combinations of the time to the forward settlement date and the time to maturity of the notional underlying index.

For example, an FRA with three months to forward settlement on a three month security is referred to as a “3 x 6”. If two parties agree on a forward rate of 4% applying to a notional value of $10,000,000 and the actual interest rate on the forward settlement date is 5%, the seller would pay the buyer the settlement amount calculated as:

[(0.05 – 0.04) x (90/360) x 10,000,000] / [1 + (0.05 x 90/360)]

= US $24,691.36

where three months is assumed to be ninety days and a year is three hundred and sixty days.

Cap/Floor/Collar

An interest rate cap is an agreement between the seller, or provider, of the cap and a borrower to limit the borrower’s floating interest rate to specified level for a period of time. The borrower selects a reference rate such as the 3 month USD LIBOR rate, a period of time such as 2 years, and a protection rate such as 0.6%. The cap consists of a series, or strip, of rights to buy a FRA at the protection rate, also called the strike rate. Each right, called a caplet, pays the borrower a sum if the reference rate exceeds the protection rate.

An interest rate floor is similar to an interest rate cap agreement. A floor guarantees an investor’s floating rate of return on investments will not fall below a specified level over an agreed period of time. In some instances, counterparties may negotiate both a cap and floor at the same time, also called a collar, offsetting the expense of the upside rate protection with the sale of the downside price floor.

Exotic

A swap is considered exotic if it contains a number of custom attributes that fall outside the standard exchange of payments described in the above swap definitions. Such attributes may include optionality that is triggered by some previously-agreed changes in reference values. Most exotic interest rate swaps have two payment legs: a funding leg and an exotic coupon leg

Debt Option

A bond (or debt) option confers the right, but not the obligation, to buy (if it is a call option) or sell (if it is a put option) a bond on a specified date for specified price called the strike price.

Swaption

A swaption gives the buyer the right, but not the obligation, to enter into a swap agreement on a specified future date, in exchange for an option premium (i.e. some component of the price of the swap that reflects the additional uncertainty surrounding whether or not the buyer will indeed enter into the swap).

USD

U.S. Dollar

EUR

European Euro

GBP

Great British Pound

JPY

Japanese Yen

AUD

Australian Dollar

CAD

Canadian Dollar

Other

All currencies not listed above.

0-3

3-6

6-12

12-24

24-60

60-120

120-360

360+

Index Tranche – Asia

A synthetic collateralized debt obligation (CDO) based on an Asian CDS index where each tranche (equity, mezzanine, senior, and super senior) references a different segment of the loss distribution of the underlying CDS index.

Index Tranche - Asia includes Japan and Australia, in addition to mainland Asian countries.

Index Tranche – Europe

A synthetic collateralized debt obligation (CDO) based on a European CDS index where each tranche (equity, mezzanine, senior, and super senior) references a different segment of the loss distribution of the underlying CDS index.

Index Tranche - North America

A synthetic collateralized debt obligation (CDO) based on a North American CDS index where each tranche (equity, mezzanine, senior, and super senior) references a different segment of the loss distribution of the underlying CDS index.

Index Tranche – Other

A synthetic collateralized debt obligation (CDO), based on any CDS index not belonging to the Asia, Europe, or North America categories, where each tranche (equity, mezzanine, senior, and super senior) references a different segment of the loss distribution of the underlying CDS index.

Index – Asia

A standardized credit derivative where the underlying reference entities are a defined basket of Asian credits.

Index - Asia includes Japan and Australia, in addition to mainland Asian countries.

Index – Europe

A standardized credit derivative where the underlying reference entities are a defined basket of European credits.

Index - North America

A standardized credit derivative where the underlying reference entities are a defined basket of North American credits.

Index – Other

A standardized credit derivative where the underlying reference entities are a defined basket of credits not belonging to the Asia, Europe, or North America categories.

Total Return Swap

A total rate of return swap (or “total return swap”, “TRS”) is an agreement between two counterparties where one party, the seller of the credit risk, agrees to pay the other party the difference in value of a specified asset, index or derivative of an asset or an index, multiplied by an agreed-upon notional value should that value increase between specified periods of time. In exchange, the other party, the buyer of the credit risk, agrees to pay the difference in value of the specified asset multiplied by the notional value should that value decrease between the same specified periods of time.

For example the parties may enter into a two year agreement where every three months they compare the value of the Barclays Capital Aggregate Bond Index to its value three months previously. If the agreed upon notional was US $10,000,000 and the value increased 0.04%, or 4 basis points (bps), the seller would pay the buyer US $4,000. If, after another three months, the value decreased by 3bps, the buyer would pay the seller US $3,000. As part of the agreement, the buyer may also make an additional payment each period to the seller based on a floating rate index multiplied by the notional value.

Total return swaps often appear in asset classes other than the credit asset class; however, for the purpose of the CFTC Swaps Report, all total return swaps are counted only in the credit asset class.

Swaption

An option to enter into a predetermined credit swap, wherein the holder of the option has the right but not the obligation to enter into a swap on a specified future date and at a specified future rate and term.

Exotic

Any other non-vanilla credit product.

Collateralized Debt Obligation (CDO)

Debt issued, by a legal entity that is specially created to holds predetermined obligations, so as to pass through the P&L of these obligations in such a way as to create specific risk profiles referred to as tranches.

Grade (Index Tranche and Index products only)

Investment Grade (IG)

For an Index Tranche or Index product to be classified as Investment Grade, the underlying index or index tranche must reference credits that are rated BBB- or higher by Standard & Poor’s, Baa3 or higher by Moody’s, or BBB (low) or higher by DBRS.

High-Yield (HY)

For an Index Tranche or Index product to be classified as High-Yield, the underlying index or index tranche must reference credits that are rated below investment grade, with a higher risk of experiencing default or other adverse credit events, but pay higher yields to investors.

Other (not IG or HY)

Index Tranche or Index products that reference credits that are not classified as either Investment Grade or High-Yield with regard to standard rating conventions. An index classified as “Other” is not necessarily of higher or lower quality than an index classified as Investment Grade or High Yield.

Portfolio Swap

A swap where the underlying reference asset is a broad-based portfolio of equity indices, such as the S&P 500 Index and the Dow Jones Industrial Average, or baskets of equities.

Variance Swap

A swap in which cash flows are exchanged based on the magnitude of the change, i.e. volatility, in a broad-based equity index or basket, rather than the direction.

Equity Swap

A swap where the underlying reference asset is a broad-based equity index (such as the S&P 500 Index) or basket.

Forwards

A contract to buy or sell an underlying broad-based equity index or basket at a specific price and date in the future.

Swaption

An option to enter into a predetermined swap, wherein the holder of the option has the right but not the obligation to enter into a swap on a specified future date and at a specified future rate and term.

Metals Swap

A swap that references a precious or industrial metal.

Energy Swap

A swap that references an energy commodity, generally crude oil and its refined products (including natural gas, reformulated gasoline, and heating oil).

Agricultural Swap

A swap that references an agricultural commodity as defined in Commission Regulation 1.3(zz).

Commodity Index Swap

A swap where the underlying reference entity is a commodity index.

Other Swap

A swap that references any other commodity not included in the categories above. This includes, for example, electricity and power swaps, freight swaps, weather swaps, and emissions swaps.

Non-Deliverable Forwards

A foreign exchange forward contract in which the currencies are not required to be physically delivered at settlement; rather the contract typically settles to a reserve currency.

Swaps

A transaction that solely involves both an exchange of two different currencies on a specific date at a fixed rate that is agreed upon on the inception of the contract covering the exchange; and a reverse exchange of the same two currencies at a later date and at a fixed rate that is agreed upon on the inception of the contract covering the exchange.

Forwards

A transaction that solely involves the exchange of two different currencies on a specific future date at a fixed rate agreed upon on the inception of the contract covering the exchange.

Options

An option to enter into a foreign exchange swap, wherein the holder of the option has the right but not the obligation to enter into a swap on a specified future date and at a specified future rate and term.

Cross-Currency

A cross-currency swap is an agreement between two counterparties to exchange interest payments and principals denominated in two different currencies. In most cross-currency swaps, the two currencies are exchanged at swap inception and expiration. Usually, coupon payments will be based on common floating rates for each of the two currencies. Other, more customized, cross-currency swaps may be structured as fixed-for-floating or fixed-for-fixed rate swaps.

Exotics

Contracts in foreign exchange that are not covered by the above categories.