SIFMA Asset Management Group Helps Develop New Market Agreed Coupon for Interest Rate Swaps

New York, NY, April 23, 2013 — SIFMA today announced that SIFMA’s Asset Management Group (AMG), working in collaboration with the International Swaps and Derivatives Association (ISDA), has helped to develop a new interest rate swap (IRS) contract structure with pre-defined, market-agreed terms. Specifically, SIFMA AMG published a term sheet and rationale for a new Market Agreed Coupon (MAC) contract that would promote liquidity and enhance transparency in IRS trading.

The proposed Market Agreed Coupon (MAC) contracts are a set of defined IRS contract specifications, including start and end dates and fixed coupon rates, which will be available for use by all swap counterparties on a voluntary basis. It is anticipated that MAC contracts will be set for multiple countries; coverage will be adjusted based on user demand. Currently, many IRS trades are highly customized agreements. The use of MAC swaps is meant to be voluntary and to compliment “par” fixed rate swaps and bespoke, customized swaps.

SIFMA AMG has worked with ISDA to develop the MAC contracts as a new tool that will facilitate IRS trading, promote market liquidity and price transparency, and support portfolio compression. SIFMA AMG expects the use of MAC swaps to benefit market participants of all sizes as central clearing and exchange trading requirements and other new rules come into effect.

“The MAC contracts provide the marketplace with the structure for a new alternative for transacting interest rate swaps using pre-agreed terms,” said Timothy Cameron, managing director and head of the SIFMA Asset Management Group. “SIFMA AMG believes MAC contracts will improve liquidity in IRS transactions and provide important benefits to end-users.”

Information regarding the MAC contract proposal, including a term sheet and rationale, is available here. The ISDA form of confirmation for utilizing MAC swaps is available here.