Swivel for Enterprise

A discussion of Swivel's potential use within institutional and enterprise environments.


Swivel is building decentralized infrastructure for interest-rate derivatives. This includes various cash flow instruments, with the first product being similar to a fixed-for-floating rate swap. Swivel’s foundations are a series of smart contracts to support an order-book based marketplace for interest rate derivatives. Starting with a simple fixed-for-floating exchange, Swivel intends to develop a series of instruments to enable risk management, funding optimization and hedging.

Our initial focus allows investors seeking stable predictable cash flows to receive fixed rates, and risk seeking investors to leverage floating rate positions. Over time, we plan to use the order book venue to introduce a range of digital instruments for rate profile optimization.

For large and small scale enterprises including financial institutions and institutional investors, Swivel offers a service with a range of advantages to different roles in your organization:

  • Optimize rate profiles

  • Reduce cost of funding

  • Improve treasury management

  • Improved Risk management through hedging

  • Improved liquidity management

  • Market making fees and attractive incentives

  • Offer retail and institutional clients an alternative to traditional fixed income products with potential for high returns, suitable for both stable return and risk-seeking investor profiles

  • Low ticket size, reduced barriers to entry and thus the ability to offer sophisticated rate management service to individual investor and smaller enterprise clients

Fixed-rate yields provide risk averse lenders with the guaranteed cash flows and avoidance of variability in income streams that may be necessary for their use case. These users have the incentive to lock in the highest rate possible. For interest rate speculators, leveraged money-market vaults provide risk-tolerant lenders and risk averse borrowers the exposure necessary to execute their strategies. These users have the incentive to pay the lowest premium possible for this exposure.

Swivel brings the ability to exchange interest rates among market participants without the need for bank intermediation and bank fees. In addition, the efficiency and low unit cost of our solution enables lenders and borrowers to enter the market at very small ticket sizes, facilitating their access to interest rate management tools that were previously restricted to the costly domain of large institutional investors.

Swivel’s short-term strategy is focused on a single use case, the exchange of principal at a stable fixed rate for leveraged floating rate returns. This allows us to quickly bring an audited, secure solution to market. At the same time, we will be building an order book-based marketplace and growing liquidity around a platform that can in future support a wide range of future interest management products, including but not limited to basis swaps, interest and principal only products, and other predictable (both deterministic and non-deterministic) future cash flow instruments.

How Swivel works

Swivel’s platform directly facilitates the ability to manage risk by allowing users to trade predictable cash flows (fixed-rate) via receiving tokenized zero-coupon bonds or the ability to leverage capital exposure by purchasing interest coupons. While the first implementation of this model is a straightforward mechanism to exchange fixed for floating cash flows on the Compound Finance platform, in future the same model can be extended to meet a variety of investment, risk management, treasury and funding needs, as well as interoperable solutions across multiple yield-providing venues.

Investors seeking stable returns post orders on our order book for a desired amount of principal, as well as rate sought and desired maturity date. Maturity dates are synchronized to support fungible positions and assure an orderly market with straightforward dates to compare returns against.

Interest rate speculators fill the order, paying an upfront premium equal to the rate sought and in return receive a time-locked vault of the tendered principal, which is then invested in floating rate positions. The principal balances are tendered against synchronized maturity dates, making comparisons across dates transparent and supporting fungible positions against common maturities. The floating rate side is highly leveraged, offering these participants the possibility of significant returns.

Flexible Order Book

Swivel is differentiated from other projects by the application of a unique, flexible orderbook infrastructure that allows the entry/exit of any fixed rate zero-coupon bond, or any corresponding floating interest coupon position through a shared pricing mechanism.

Support for Efficient Risk Management and Return Seeking

Users and market makers can use Swivel’s orderbook to accurately execute strategies and take positions with a precision not possible on an AMM (Automated Market Maker).

Advantages for market makers

Swivel offers attractive incentives for market makers. Institutions with large positions in other venues can offset their risk by making markets while taking countervailing positions on Swivel, and generating market making fees on the spreads between venues.

Swivel’s orderbook facilitates active capital allocation with respect to underlying money-market rates, ensuring market-makers can manage risk and retain an edge in times of rate volatility.

The orderbook’s shared pricing mechanism results in dynamic pricing and significantly enhanced capital efficiency. Each user has the ability to enter into positions that more exactly meet their appetites for risk, reward and tenor than wholesale financial markets, without the need for bank intermediation or predatory fees. Swivel facilitates exchange of value and risk at a level of precision that previously has been unavailable to individual investors and small enterprises.

Future Developments

With our capital efficient issuance and order book mechanisms, we provide the initial capability to exchange fixed for floating rate positions, in the future we will enable the ability to efficiently manage a number of various cash-flows. These programmable cash-flows then enable a number of structured instruments that are core to efficient capital allocation and risk-management. We may also provide instruments to manage the differences in risk and maturity dates across different cash instruments, enabling more accurate hedging and improved fungibility.