Swap dealing in the first few months of the euro is likely to be far from standard. A survey of market participants on what conventions they will use shows a wide spectrum of preferences, or should we call it inertia?
The survey, initiated by Westdeutsche Landesbank in London, and expanded by derivatives specialist Intercapital Brokers, polled 101 banks in Europe and worldwide, including most of the market-makers and market participants in swaps denominated in European currencies.
The profile of next year's typical plain vanilla euro swap turns out a little uncertain. But it is most likely to have the following characteristics:
A fixed leg based on an annualized interest rate calculated with a30/360 day-count.
A floating leg based on six-month Euribor (actual/360 day-count) - which raises the question will one-year swaps be traded against three-month Euribor?
The starting date will be Monday to Friday in any week with the exception of December 25 and January 1 (the only days that the pan-European payment link system, Target, is closed)
The fixing will be any Target day two days before the start date (37% of respondents are pointing to reset dates on London and European Union days - including selected holidays).