Commodity Swap

Commodity Swap

A swap involving the market price of a commodity. In a commodity swap, a financial institution is usually one of the counterparties. A user of the commodity may agree to pay the financial institution a fixed price for the commodity in exchange for the institution paying the user the spot price for the same commodity. On the other hand, a producer of a commodity may agree to pay the financial institution the market price in exchange for receiving a fixed price. A commodity swap usually involves oil and is used to protect against price fluctuations.
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The China imports are accounted for by long-standing commodity swap arrangements, but how is Turkey still able to import 200,000 barrels per day (bpd), despite the deepening economic sanctions on Tehran?
The series 2018A, 2018B, and 2018C commodity supply revenue bonds (collectively, the 2018 bonds) are secured by the trust estate pledged under the indenture, including revenues derived from the sale of natural gas or electricity, payments received from the commodity swap provider and interest rate swap provider, and any payments received pursuant to the Receivables Purchase Agreement (RPA).
"Another part of the trade between Iranian exporters and Iraqi traders will be in accordance with the commodity swap or in a consensual manner," Al-Ishaq said, according to the Mehr news agency.
(15) Further, Technical Advice Memorandum (TAM) 9730007 from the IRS National Office held that monthly payments under a commodity swap determined to be a notional principal contract were periodic payments properly characterized as ordinary income and expenses.
(1) Commodity Futures Trading Commission, "Staff Report on Commodity Swap Dealers and Index Traders with Commission Recommendations" September 2008.
Bloomberg's SEF, the first SEF to receive Commodity Futures Trading Commission approval, provides market participants with access to interest rate, credit default, foreign exchange and commodity swap liquidity.
Alternatively, the institution might invest in a total return commodity swap to gain exposure to a broad commodity index.
Some governments have been involved in interest-rate swap agreements or commodity swap agreements that have come to an end because the counterparty (or the counterparty's credit support provider) committed or experienced an act of default or a termination event as described in the swap agreement.
Is a commodity swap regulated by the Commodities Futures Trading Commission?
The bank's role as the counterparty in the first crude oil derivatives hedge in Sri Lanka, first oil commodity swap done in Pakistan and Bangladesh's first commodity derivatives deal reinforced the bank's experience and expertise in its footprint.
This type of swap is called a commodity swap. Two more types of swaps are used by various businesses--interest rate swaps and exchange rate swaps.
In July last year, the IRS released a technical advice memorandum outlining its position regarding the character of payments under a commodity swap entered into by a taxpayer.

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