Interest Rate Derivative Trade Reporting

What is an interest rate derivative (IRD)?

An interest rate derivative (IDR) or swap is a contract between two parties that agree to exchange interest payments based on fixed and floating interest rates. IRDs are typically forward contracts where the specific term dates and prices can be customised according to the arrangement. They are predominantly used by market participants (which can include the likes of traders, banks, borrowers and corporate treasurers) to hedge their positions or speculate on market activity. However, they come with inherent market risk and exposure risk.

The most commonly used IRD is a 'plain vanilla' swap, where fixed-rate payments are exchanged for floating (or variable) rate payments based on the overnight benchmark financing rate, such as SOFR (i.e., the benchmark interest rate for dollar-denominated derivatives and loans, which replaced) or ESTER (Euro Short-Term Rate).