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 Where a broker acts as [[riskless principal]] (or any other kind of [[principal]]) there is NO commission: the payment we ''call'' a “[[commission]]” is really just an additional [[fee]].
-For example, a real estate [[agent]] arranges a transaction between buyer and seller and is not in the contractual chain itself. Therefore one pays the purchase price to the seller, but the commission to the agent - look upon it as a derivative of the purchase price, even — though honestly that is slightly stretching the {{tag|metaphor}}.
+===Rationale===
+*Agency “commission”: In a pure [[agency]] contract, there is no direct [[transaction]] between [[agent]] and [[principal]], so the only way the agent can be remunerated is by a separate “agency fee”: this is a “commission” calculated on the value of the transaction between Street and the Customer directly to which the agent is not a party.
-if you have legal, regulatory or — gasp — tax reasons for not wanting to have anything to do with a principal contract between your swap counterparty and its hedge counterparty, best call the amount you pay to your swap counterparty as consideration for its agreeing to put o the trade as a fee not a commission.
-[[Amwell J|My]] own view is that “a rose is a rose, and by any other name smells just as sweet” - but tax lawyers aren't so well read.
-Rationale:
-*Agency “Commission”: In a pure agency contract, there is no direct transaction between Agent and Principal, so the only way the agent can be remunerated is by a separate “agency fee”: this is a “commission” calculated on the value of the transaction between Street and the Customer directly to which the agent is not a party.
 *[[Riskless Principal]] compensation: In a riskless principal structure there are two contracts: one between Street and Dealer, and between Dealer and Principal. Therefore Dealer may extract a fee by:
 **'''Mark-up/Mark-down''': imposing a mark up/mark down between the two contracts; OR
 **'''Fee''': separately charge a fee, which may be labelled a “commission”.
-===See also===
+{{box|
+'''Example''': A real estate [[agent]] arranges a transaction between vendor and purchaser. It is not in the [[contractual chain]] itself. Therefore one pays the purchase price to the [[vendor]], but the [[commission]] to the [[agent]] - look upon it as a [[derivative]] of the purchase price, if the fancy takes you — though honestly even I think that is to stretch the {{tag|metaphor}} a little.
+}}
+====Swaps====
+Now: if you have [[legal]], [[regulatory]] or — gasp — [[tax]] reasons for not wanting to have anything to do with the [[principal]] contract between — say your [[swap counterparty]] and its [[hedge]], you are best advised to call the [[consideration]] you pay your [[swap counterparty]] for agreeing to pass the economics of its [[hedge]] to you a “[[fee]]”, because the counterparty is your counterparty in the contractual chain, and not a “[[commission]]”, which might be taken by mendacious minds in revenue departments to imply it was an [[agent]].
+====Does it really matter?====
+[[Amwell J|My]] own view is that “a rose is a rose, and by any other name smells just as sweet” - but tax lawyers aren't so well read. And heaven only knows what passes for literature for tax inspectors.
+{{seealso}}
 *[[Agent]]
 *[[Principal]]
 *[[Riskless principal]]