Swap vs. Sweep — What's the Difference?
Edited by Tayyaba Rehman — By Urooj Arif — Updated on April 15, 2024
A swap involves exchanging financial instruments or cash flows between parties, often used in finance for hedging risk, whereas a sweep is a banking practice where funds are automatically moved between accounts to optimize interest or manage liquidity.
Difference Between Swap and Sweep
Table of Contents
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Key Differences
Swap transactions in finance typically involve two parties agreeing to exchange one stream of cash flows for another, based on specified terms. These can include interest rates, currencies, or commodities. Whereas, a sweep involves the automatic transfer of funds from one account to another based on pre-set criteria, often within the same institution.
In terms of purpose, swaps are used primarily to manage financial risk or speculate. For example, a company might enter into an interest rate swap to secure a fixed interest rate instead of a variable one. On the other hand, sweeps are used to maximize interest earnings or manage cash flow more effectively. A common example is sweeping excess cash from a checking account into a higher-interest savings account nightly.
Swaps are complex financial instruments that require negotiation and often involve significant risk and rewards, depending on market movements. While, sweeps are relatively straightforward and involve minimal risk, as they are more about cash management than investment.
For businesses, engaging in swaps might require expertise in financial markets and access to financial services that can structure and manage these instruments. Whereas, setting up a sweep account is generally simpler and can be an efficient tool for businesses to manage their daily cash flow.
Regulations surrounding swaps have tightened significantly since the 2008 financial crisis, with requirements for transparency and clearing through central parties. In contrast, sweep accounts are subject to banking regulations which ensure the safety and availability of the funds.
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Comparison Chart
Definition
An agreement to exchange financial instruments or cash flows.
Automatic transfer of funds between different accounts.
Primary Use
Risk management and speculation.
Optimizing interest earnings or liquidity management.
Complexity
High, requires financial expertise.
Low, usually automated and straightforward.
Risk Level
Can be high, depending on underlying assets and market conditions.
Low, focused on cash management.
Regulatory Environment
Heavily regulated post-2008 financial crisis.
Governed by banking regulations, ensuring fund safety.
Compare with Definitions
Swap
Can involve commodities, debts, or other financial instruments.
Commodity swaps allow companies to secure stable pricing on raw materials.
Sweep
Helps businesses manage liquidity efficiently.
Daily sweeps ensure that no excess cash lies idle in low-interest accounts.
Swap
Commonly used to hedge against interest rate changes.
The corporation used an interest rate swap to lock in a lower rate.
Sweep
Automatic banking mechanism for managing funds.
Overnight, funds are swept from their checking to a high-yield savings account.
Swap
Often customized to meet specific financial goals.
Custom swaps are negotiated to specifically address a company’s exposure to financial risks.
Sweep
Can be set up to manage overdrafts.
Sweep accounts can automatically cover charges that exceed the checking account balance.
Swap
A financial agreement where parties exchange differing financial assets or cash flows.
They entered a currency swap to protect against forex volatility.
Sweep
Involves minimal risk and effort.
Once set up, sweep accounts require little to no active management.
Swap
Requires understanding of financial markets.
Engaging in swaps requires careful risk assessment and market analysis.
Sweep
Often used by individuals and businesses for better financial management.
Many businesses use sweep accounts to optimize their cash flow and interest income.
Swap
Take part in an exchange of
We swapped phone numbers
I'd swap places with you any day
I was wondering if you'd like to swap with me
Sweep
To clean or clear, as of dirt, with a broom or brush
Sweep a chimney.
Swap
An act of exchanging one thing for another
Let's do a swap
Sweep
To clear away with a broom or brush
Swept snow from the steps.
Swap
To trade one thing for another.
Sweep
To clear (a path or space) with a broom or brush.
Swap
To exchange (one thing) for another.
Sweep
To search thoroughly
The counselors swept the dormitory during the fire drill.
Swap
An exchange of one thing for another.
Sweep
To search for and remove (electronic eavesdropping devices) from a place
Swept the room for bugs.
Swap
A contract in which two parties agree to exchange periodic interest payments, especially when one payment is at a fixed rate and the other varies according to the performance of a reference rate, such as the prime rate.
Sweep
To touch or brush lightly, as with a trailing garment
Willow branches sweeping the ground.
Swap
(transitive) To exchange or give (something) in an exchange (for something else).
Sweep
To pass over or through a surface or medium with a continuous movement
He swept the sponge over the tile. The conductor swept her baton through the air.
Swap
To hit, to strike.
Sweep
To clear, drive, or convey with relentless force
The flood waters swept away everything in their path.
Swap
To beat the air, or ply the wings, with a sweeping motion or noise; to flap.
Sweep
To wipe out at a single stroke. Often used with away
The incident in effect swept away all her dreams.
Swap
To descend or fall; to rush hastily or violently.
Sweep
To remove or carry off with a swift brushing motion
Swept the cards off the table.
Swept the child into his arms.
Swap
An exchange of two comparable things.
Sweep
To move across or through swiftly or broadly
News of the lunar landing swept the country.
Swap
(finance) A financial derivative in which two parties agree to exchange one stream of cashflow against another stream.
Sweep
To pass quickly across, as when searching
His gaze swept the horizon.
Swap
Space available in a swap file for use as auxiliary memory.
How much swap do you need?
Sweep
To drag the bottom of (a body of water).
Swap
(Cantab slang) A social meal at a restaurant between two university societies, usually involving drinking and banter; commonly associated with fining and pennying; equivalent to a crewdate at Oxford University.
Sweep
To win all games in (a series) or all stages of (a contest)
Swept the World Series.
Swap
A blow; a stroke.
Sweep
To win overwhelmingly in
The opposition party swept the election.
Swap
To strike; - with off.
Sweep
To clean or clear a surface with a broom or brush.
Swap
To exchange (usually two things of the same kind); to swop.
Sweep
To search an area for something.
Swap
To fall or descend; to rush hastily or violently.
All suddenly she swapt adown to ground.
Sweep
To search for and remove electronic eavesdropping devices.
Swap
To beat the air, or ply the wings, with a sweeping motion or noise; to flap.
Sweep
To move swiftly or broadly
The wind swept over the plain.
Swap
A blow; a stroke.
Sweep
To move swiftly in a lofty manner, as if in a trailing robe
She swept by in silence.
Swap
An exchange; a barter.
Sweep
To trail, as a long garment.
Swap
Hastily.
Sweep
To extend gracefully, especially in a long curve
The hills sweep down to the sea.
Swap
An equal exchange;
We had no money so we had to live by barter
Sweep
To extend in a wide range
Searchlights swept across the sky.
Swap
Exchange or give (something) in exchange for
Sweep
A clearing out or removal with a broom or brush.
Swap
Move (a piece of a program) into memory, in computer science
Sweep
A thorough search of an area
A police sweep for drug dealers.
Sweep
A search for and removal of electronic eavesdropping devices, as in a room.
Sweep
A wide curving motion
A sweep of the arm.
Sweep
A curve or contour that resembles the path of sweeping motion
The sweep of her hair.
Sweep
An extent or stretch
A sweep of green lawn.
Sweep
Range or scope
The broad sweep of history.
Sweep
(Football) An end run in which one or more linemen leave the line of scrimmage and block in advance of the ball carrier.
Sweep
One who sweeps, especially a chimney sweep.
Sweep
Sweeps Sweepings.
Sweep
The winning of all stages of a game or contest.
Sweep
An overwhelming victory or success.
Sweep
A long oar used to propel a boat.
Sweep
A long pole attached to a pivot and used to raise or lower a bucket in a well.
Sweep
Sweeps (used with a sing. or pl. verb) Informal Sweepstakes.
Sweep
Sweeps The period each fall, winter, and spring when television ratings are accrued and studied and advertising rates are reset.
Sweep
The national survey of local stations that is conducted to determine these ratings.
Sweep
The steady motion of an electron beam across a cathode-ray tube.
Sweep
(transitive) To clean (a surface) by means of a stroking motion of a broom or brush.
To sweep a floor, the street, or a chimney
Sweep
(intransitive) To move through a (horizontal) arc or similar long stroke.
The wind sweeps across the plain.
The offended countess swept out of the ballroom.
Sweep
(transitive) To search (a place) methodically.
Sweep
To travel quickly.
Sweep
(cricket) To play a sweep shot.
Sweep
(curling) To brush the ice in front of a moving stone, causing it to travel farther and to curl less.
Sweep
To move something in a long sweeping motion, as a broom.
Sweep
To win (a series) without drawing or losing any of the games in that series.
Sweep
To defeat (a team) in a series without drawing or losing any of the games in that series.
Sweep
(military) To clear (a body of water or part thereof) of mines.
The channel was swept twice before the battlefleet proceeded through it.
Sweep
(transitive) To remove something abruptly and thoroughly.
She swept the peelings off the table onto the floor.
The wind sweeps the snow from the hills.
The flooded river swept away the wooden dam.
Sweep
To brush against or over; to rub lightly along.
Sweep
To carry with a long, swinging, or dragging motion; hence, to carry in a stately or proud fashion.
Sweep
To strike with a long stroke.
Sweep
(rowing) To row with one oar to either the port or starboard side.
Sweep
(nautical) To draw or drag something over.
To sweep the bottom of a river with a net
Sweep
To pass over, or traverse, with the eye or with an instrument of observation.
To sweep the heavens with a telescope
Sweep
To vacuum a carpet or rug.
Sweep
A single action of sweeping.
Give the front steps a quick sweep to get rid of those fallen leaves.
Sweep
The person who steers a dragon boat.
Sweep
A person who stands at the stern of a surf boat, steering with a steering oar and commanding the crew.
Sweep
A chimney sweep.
Sweep
A methodical search, typically for bugs electronic listening devices.
Sweep
(cricket) A batsman's shot, played from a kneeling position with a swinging horizontal bat.
Bradman attempted a sweep, but in fact top edged the ball to the wicket keeper
Sweep
A lottery, usually on the results of a sporting event, where players win if their randomly chosen team wins.
Jim will win fifty dollars in the office sweep if Japan wins the World Cup.
Sweep
A flow of water parallel to shore caused by wave action at an ocean beach or at a point or headland.
Sweep
(aviation) The degree to which an aircraft's wings are angled backwards (or, occasionally, forwards) from their attachments to the fuselage.
The MiG-17's inner wing has 45 degrees of sweep.
Sweep
(martial arts) A throw or takedown that primarily uses the legs to attack an opponent's legs.
Sweep
Violent and general destruction.
The sweep of an epidemic disease
Sweep
(metalworking) A movable template for making moulds, in loam moulding.
Sweep
(card games) In the game casino, the act of capturing all face-up cards from the table.
Sweep
The compass of any turning body or of any motion.
The sweep of a door; the sweep of the eye
Sweep
Direction or departure of a curve, a road, an arch, etc. away from a rectilinear line.
Sweep
A large oar used in small vessels, partly to propel them and partly to steer them.
Sweep
(rowing) A rowing style in which each rower rows with oar on either the port or starboard side.
I am primarily a sweep rower.
Sweep
The almond furnace.
Sweep
A long pole, or piece of timber, moved on a horizontal fulcrum fixed to a tall post and used to raise and lower a bucket in a well for drawing water.
Sweep
Any of the blades of a windmill.
Sweep
(in the plural) The sweepings of workshops where precious metals are worked, containing filings, etc.
Sweep
Any of several sea chubs in the family Kyphosidae (subfamily Scorpidinae).
Sweep
An expanse or a swath, a strip of land.
Sweep
To pass a broom across (a surface) so as to remove loose dirt, dust, etc.; to brush, or rub over, with a broom for the purpose of cleaning; as, to sweep a floor, the street, or a chimney. Used also figuratively.
I will sweep it with the besom of destruction.
Sweep
To drive or carry along or off with a broom or a brush, or as if with a broom; to remove by, or as if by, brushing; as, to sweep dirt from a floor; the wind sweeps the snow from the hills; a freshet sweeps away a dam, timber, or rubbish; a pestilence sweeps off multitudes.
The hail shall sweep away the refuge of lies.
I have already swept the stakes.
Sweep
To brush against or over; to rub lightly along.
Their long descending train,With rubies edged and sapphires, swept the plain.
Sweep
To carry with a long, swinging, or dragging motion; hence, to carry in a stately or proud fashion.
And like a peacock sweep along his tail.
Sweep
To strike with a long stroke.
Wake into voice each silent string,And sweep the sounding lyre.
Sweep
To draw or drag something over; as, to sweep the bottom of a river with a net.
Sweep
To pass over, or traverse, with the eye or with an instrument of observation; as, to sweep the heavens with a telescope.
Sweep
To clean rooms, yards, etc., or to clear away dust, dirt, litter, etc., with a broom, brush, or the like.
Sweep
To brush swiftly over the surface of anything; to pass with switness and force, as if brushing the surface of anything; to move in a stately manner; as, the wind sweeps across the plain; a woman sweeps through a drawing-room.
Sweep
To pass over anything comprehensively; to range through with rapidity; as, his eye sweeps through space.
Sweep
The act of sweeping.
Sweep
The compass or range of a stroke; as, a long sweep.
Sweep
The compass of any turning body or of any motion; as, the sweep of a door; the sweep of the eye.
Sweep
The compass of anything flowing or brushing; as, the flood carried away everything within its sweep.
Sweep
Violent and general destruction; as, the sweep of an epidemic disease.
Sweep
Direction and extent of any motion not rectlinear; as, the sweep of a compass.
Sweep
Direction or departure of a curve, a road, an arch, or the like, away from a rectlinear line.
The road which makes a small sweep.
Sweep
One who sweeps; a sweeper; specifically, a chimney sweeper.
Sweep
A movable templet for making molds, in loam molding.
Sweep
The mold of a ship when she begins to curve in at the rungheads; any part of a ship shaped in a segment of a circle.
Sweep
The almond furnace.
Sweep
A long pole, or piece of timber, moved on a horizontal fulcrum fixed to a tall post and used to raise and lower a bucket in a well for drawing water.
Sweep
In the game of casino, a pairing or combining of all the cards on the board, and so removing them all; in whist, the winning of all the tricks (thirteen) in a hand; a slam.
Sweep
The sweeping of workshops where precious metals are worked, containing filings, etc.
Sweep
A wide scope;
The sweep of the plains
Sweep
Someone who cleans soot from chimneys
Sweep
Winning all or all but one of the tricks in bridge
Sweep
A long oar used in an open boat
Sweep
(American football) an attempt to advance the ball by running around the end of the line
Sweep
A movement in an arc;
A sweep of his arm
Sweep
Sweep across or over;
Her long skirt brushed the floor
A gasp swept cross the audience
Sweep
Move with sweeping, effortless, gliding motions;
The diva swept into the room
Shreds of paper sailed through the air
The searchlights swept across the sky
Sweep
Sweep with a broom or as if with a broom;
Sweep the crumbs off the table
Sweep under the bed
Sweep
Force into some kind of situation, condition, or course of action;
They were swept up by the events
Don't drag me into this business
Sweep
To cover or extend over an area or time period;
Rivers traverse the valley floor
The parking lot spans 3 acres
The novel spans three centuries
Sweep
Clean by sweeping;
Please sweep the floor
Sweep
Win an overwhelming victory in or on;
Her new show dog swept all championships
Sweep
Cover the entire range of
Sweep
Make a big sweeping gesture or movement
Common Curiosities
How does a sweep account work?
A sweep account automatically transfers excess funds into a different account, usually a higher interest-bearing one, at the end of each business day.
Why might a company use a swap?
To manage risk related to interest rates, currency exchange, or other financial factors.
What is a swap in financial terms?
A swap is an agreement between two parties to exchange sequences of cash flows for a set period of time.
Are sweep accounts safe?
Yes, sweep accounts are generally safe as they are regulated under banking laws.
What happens if there isn't enough money in the primary account for a sweep?
Most sweep setups have minimum balance requirements to avoid overdrawing the account.
Can swaps be risky?
Yes, swaps can carry significant risks, particularly if the underlying assets are volatile.
How can one set up a sweep account?
Contact your bank to set up a sweep account; they will guide you through the setup based on your financial goals.
What type of accounts can be linked in a sweep arrangement?
Typically, checking accounts can be linked to savings accounts, money market funds, or lines of credit.
What are the benefits of a sweep account?
They help in maximizing interest income and managing liquidity efficiently.
Who can benefit from using swaps?
Financially savvy investors and businesses looking to hedge against certain economic risks.
What regulations affect swaps?
Swaps are subject to financial market regulations, which can include mandatory clearing and reporting.
Are there fees associated with maintaining a sweep account?
This depends on the bank and the specific type of sweep account; some may have fees, while others do not.
Can swaps affect a company’s balance sheet?
Yes, swaps can have significant impacts on a company’s financial statements, depending on the nature and size of the swap.
Can individual investors engage in swaps?
Yes, but they require significant knowledge of the financial markets and access to financial products.
Who regulates sweep accounts?
Sweep accounts are regulated by banking regulators, ensuring their safe operation under financial laws.
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Written by
Urooj ArifUrooj is a skilled content writer at Ask Difference, known for her exceptional ability to simplify complex topics into engaging and informative content. With a passion for research and a flair for clear, concise writing, she consistently delivers articles that resonate with our diverse audience.
Edited by
Tayyaba RehmanTayyaba Rehman is a distinguished writer, currently serving as a primary contributor to askdifference.com. As a researcher in semantics and etymology, Tayyaba's passion for the complexity of languages and their distinctions has found a perfect home on the platform. Tayyaba delves into the intricacies of language, distinguishing between commonly confused words and phrases, thereby providing clarity for readers worldwide.
