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 In some jurisdictions, derivatives are taxed differently — more favourably — than [[Cash equity|cash equities]] (for example [[stamp duty reserve tax]], and in the US, for certain types of underlier, under [[871(m)]]) so it is important that your synthetic position doesn’t look like a tax play. [[Tax attorney|Tax attorneys]] — especially American ones — fret mightily that high-delta [[equity derivatives]] do.
-One of the key indicators, they intuit, is the degree to which the contract permits a swap counterparty influence or control its [[prime broker]]’s hedge. A swap counterparty should care not one whit about its broker’s hedge — other than its [[cost]]. If it does takes an unhealthy interest, the swap position may be — dramatic look gopher — [[recharacterised]] as a ''disguised [[custody]] arrangement'' of shares the swap counterparty has in reality bought, and on which it should pay tax, [[stamp duty]] and so on. Depending on which tax specialist you ask, an “unhealthy interest” might extend even to the execution price the[[broker-dealer]] achieves on its hedge. (This seems potty to us, by the way, but such is the interior world of the US tax attorney). The attorneys are greatkly calmed by the suggestion that a hedge execution price is imaginary, and not real, even though it happens to be identical to the real one. Thus, you will see much chatter about prices a “[[hypothetical broker-dealer]]” might achieve selling [[fungible]] securities, and [[volume-weighted average price]]s and so on.
+One of the key indicators, they intuit, is the degree to which the contract permits a swap counterparty influence or control its [[prime broker]]’s hedge. A swap counterparty should care not one whit about its broker’s hedge — other than its [[cost]]. If it does takes an unhealthy interest, the swap position may be — dramatic look gopher — [[recharacterised]] as a ''disguised [[custody]] arrangement'' of shares the swap counterparty has in reality bought, and on which it should pay tax, [[stamp duty]] and so on. Depending on which tax specialist you ask, an “unhealthy interest” might extend even to the execution price the[[broker-dealer]] achieves on its hedge. (This seems potty to us, by the way, but such is the interior world of the US tax attorney). [[US tax attorney]]s are greatly calmed by the suggestion that a hedge execution price is imaginary, and not real, even though it happens to be identical to the real one. Thus, you will see much chatter about prices a “[[hypothetical broker-dealer]]” might achieve selling [[fungible]] securities, and [[volume-weighted average price]]s and so on.
 So who, why, which or what is this '''[[hypothetical broker-dealer]]'''? Well, he’s a fellow just like the ''actual'' [[broker-dealer]] — in the same jurisdiction, having the same taxation status, earning the same income, executing the same hedge transactions, eating at the same restaurants, having the same GSOH and watching the same stuff on Netflix — but ''not'' the actual [[broker-dealer]]. He’s like actual [[broker-dealer]]’s “sober me”, only ''he gets drunk too''. Now this might strike you, as it strikes the [[JC]], as just too cute – too much of a playground argument to hold water. (“I didn’t break the window, sir, honest, sir, it was a boy who looked exactly like me who arrived from out of nowhere and is gone now”). But [[US tax attorney]]s seem to be taken in by it even, if they won’t buy arguments on actual economic substance.