Location Swap

A location swap is a transaction in which two parties exchange the same amount and grade of a commodity held in different places, so each ends up owning metal, oil or gas where it is more useful, without shipping it. In the precious-metals market, for example, a bank might swap gold bars held in a London vault for gold held in Zurich or New York, usually paying or receiving a small fee that reflects transport, storage and local demand. Such swaps help traders meet delivery obligations without paying freight and insurance. They are a form of swap in the physical market and are closely related to the gold swap and to quality swaps, which exchange one grade or bar size for another. Location matters because standards such as London Good Delivery are tied to approved vaults. The term has no settled meaning specific to crypto.