Commodity Swap

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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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triReduce offers compression across a broad spectrum of products: cleared and uncleared interest rate products in 27 currencies, credit default swaps, commodity swaps, inflation swaps, cross currency swaps, and FX forwards.
Rather, commodity swaps are usually set in bilateral contracts between two parties, typically between large commercial banks and other institutional investors.
The CFTC was given authority over a very broadly defined universe of 'swaps', including interest rate swaps, commodity swaps, agricultural swaps, currency swaps and swaps (including credit default swaps) based on broad-based indices of securities.
Volume of commodity swaps cleared grew 82% year-on-year and 19% month-on-month to 43,055 contracts.
These commodity swaps have been increasingly difficult to maintain because of market differences in water and gas, and mounting political rivalry.
It also supports commodity swaps as hedging instruments, and gives the option to either have a system generated hypothetical derivative or one that is user specified.
The hedging definition [in the rule] talks about physical delivery, so we're uncertain about whether that applies only to derivatives like commodity swaps," he says.
A final rule published in May by federal banking agencies requires commercial banks to look at the risk profile of end-users negotiating for interest rate or commodity swaps and determine whether a margin is needed.
The Treasury decision to exempt FX swaps and forwards does nothing to erase business concerns about having to post margins on interest rate and commodity swaps, one of the issues that dominated the April 12 Senate hearing.
The changes proposed in the ED apply solely to interest rate swaps and commodity swaps.
Legacy reportedly entered into commodity swaps associated with the Wyoming acquisition over the period of 2010-2014.
The commodity swaps market is large and growing, and it can be argued that the logic that led the CFTC to call for more regulation of electronic facilities--that such facilities were economically linked to the regulated markets and used by the same traders--also applies to the swaps market.