What role do intermediaries play in swap transactions?

In swap transactions, intermediaries play a crucial role in facilitating the exchange between parties. They act as middlemen that connect two parties looking to enter into a swap agreement, which typically involves the exchange of cash flows based on different interest rates or currencies. Intermediaries help to match the parties, ensuring that both sides achieve mutually beneficial terms. This role is essential because it enhances liquidity and can lead to improved pricing as intermediaries can aggregate demands and supply from multiple parties.

Through their involvement, intermediaries also help in reducing counterparty risk, as they often provide a mechanism that helps to manage this risk between the participants in the swap. By facilitating these transactions, they help create a more efficient and transparent market, thereby encouraging more participants to engage in swap agreements.

In contrast, the other roles, such as executing trades only for non-profits or providing insurance for the deals, do not accurately describe the primary function of intermediaries in these financial transactions. Additionally, intermediaries do not determine the fixed rates for swaps; instead, such rates are typically determined based on prevailing market conditions and negotiations between the parties involved.