Editing Interest rate swap (section)

==Quotation and market-making==
=== ICE Swap rate ===
ICE Swap rate<ref>[https://www.theice.com/iba/ice-swap-rate ICE Swap Rate]</ref> replaced the rate formerly known as ISDAFIX in 2015. Swap Rate benchmark rates are calculated using eligible prices and volumes for specified interest rate derivative products. The prices are provided by trading venues in accordance with a “Waterfall” Methodology. The first level of the Waterfall (“Level 1”) uses eligible, executable prices and volumes provided by regulated, electronic, trading venues. Multiple, randomised snapshots of market data are taken during a short window before calculation. This enhances the benchmark's robustness and reliability by protecting against attempted manipulation and temporary aberrations in the underlying market.{{Citation needed|date=August 2021}}

===Market-making===
The market-making of IRSs is an involved process involving multiple tasks; curve construction with reference to interbank markets, individual derivative contract pricing, risk management of credit, cash and capital. The cross disciplines required include quantitative analysis and mathematical expertise, disciplined and organized approach towards profits and losses, and coherent psychological and subjective assessment of financial market information and price-taker analysis. The time sensitive nature of markets also creates a pressurized environment. Many tools and techniques have been designed to improve efficiency of market-making in a drive to efficiency and consistency.<ref name=PTIRDs />

<!-- ==Controversy==

In June 1988 the [[Audit Commission (United Kingdom)|Audit Commission]] was tipped off by someone working on the swaps desk of [[Goldman Sachs]] that the [[London Borough of Hammersmith and Fulham]] had a massive exposure to interest rate swaps. When the commission contacted the council, the chief executive told them not to worry as "everybody knows that interest rates are going to fall"; the treasurer thought the interest rate swaps were a "nice little earner". The Commission's Controller, [[Howard Davies (economist)|Howard Davies]], realised that the council had put all of its positions on interest rates going down and ordered an investigation.<ref name="Audit Commission">Duncan Campbell-Smith, "Follow the Money: The Audit Commission, Public Money, and the Management of Public Services 1983-2008", Allen Lane, 2008, chapter 6 ''passim''.</ref>

By January 1989 the Commission obtained legal opinions from two [[Queen's Counsel]]. Although they did not agree, the commission preferred the opinion that it was ''[[ultra vires]]'' for councils to engage in interest rate swaps (ie. that they had no lawful power to do so). Moreover, interest rates had increased from 8% to 15%. The auditor and the commission then went to court and had the contracts declared void (appeals all the way up to the [[Judicial functions of the House of Lords|House of Lords]] failed in ''[[Hazell v Hammersmith and Fulham LBC]]''); the five banks involved lost millions of pounds. Many other local authorities had been engaging in interest rate swaps in the 1980s.<ref name="Audit Commission">Duncan Campbell-Smith, "Follow the Money: The Audit Commission, Public Money, and the Management of Public Services 1983-2008", Allen Lane, 2008, chapter 6 ''passim''.</ref> This resulted in several cases in which the banks generally lost their claims for [[compound interest]] on debts to councils, finalised in ''[[Westdeutsche Landesbank Girozentrale v Islington London Borough Council]]''.<ref>[1996] [http://www.bailii.org/uk/cases/UKHL/1996/12.html UKHL 12], [1996] AC 669</ref> Banks did, however, recover some funds where the derivatives were "in the money" for the Councils (ie, an asset showing a profit for the council, which it now had to return to the bank, not a debt).<ref name="Audit Commission">Duncan Campbell-Smith, "Follow the Money: The Audit Commission, Public Money, and the Management of Public Services 1983-2008", Allen Lane, 2008, chapter 6 ''passim''.</ref>

The controversy surrounding interest rate swaps reached a peak in the UK during the [[2008 financial crisis]] where banks sold unsuitable interest rate hedging products on a large scale to SMEs. The practice has been widely criticised<ref>{{cite web|url=https://lexlaw.co.uk/solicitors-london/uk-parliament-condemns-rbs-grg-mistreatment-sme-bank-misconduct-litigation-solicitors-london/|title=HM Parliament Condemns RBS GRG's Parasitic Treatment of SMEs Post date|date=26 January 2018}}</ref> by the media and Parliament.
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