I disagree, but mainly with your terminology. A market maker is literally "making a market" meaning that they are willing to take either side of a trade. So market making in this instance would mean that I am willing to take a swap at rate X, or offer a swap at rate Y. Placing limit orders is not solely the act of a market maker. That being said, they are not placing limit orders, in that technically a limit order is an order to be filled at a given price. If they aren't setting a price, it isn't a limit order. It probably has more in common with an opening or closing cross, in that it is kind of like a large auction at a price TBD, but it isn't exactly like that. It is also similar to a market order, in that they don't care what the price is.

Either way, overlap happens, usually, due to differences in time preferences. All that is offered is 2 days, all that is requested is 30 days, for example, so no match occurs.

Thanks for your comment though. And we will be changing it, but it will probably just be to make it more responsive and less liable to dampen the price movements.

I'll respond to some other comments below, which might have some relevance.