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Swaps as Eurodollar Futures Positions

5. Standardization: Swaps are more flexible in design than futures that are standardized.

6. Cash Flow Timing: CFs on swaps are based on the LIBOR 6 months earlier; CFs on futures are based on the current LIBOR.

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Swap Market Structure

� Swap Banks: The market for swaps is organized through a group of brokers and dealers collectively referred to as swap banks.

�As brokers, swap banks try to match counterparties.

�As dealers, swap banks take temporary positions as fixed or floating players; often hedging their positions with positions in Eurodollar futures contracts or with spot fixed-rate and floating-rate bond positions.