Template:M comp disc Equity Derivatives 12.9(a)(ix): Difference between revisions
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Compare Hedging Party, Determining Party and Calculation Agent — between them rich fodder for [[buy-side legal eagle]]s to make a nuisance of themselves arguing the toss over plainly fatuous “potential” risks. | Compare Hedging Party, Determining Party and Calculation Agent — between them rich fodder for [[buy-side legal eagle]]s to make a nuisance of themselves arguing the toss over plainly fatuous “potential” risks. | ||
Here’s how it is: the [[swap dealer]] is the one you go to because of its market access, back-office systems and attractive financing. You place, or [[Equity give-up|give up]], your orders to the swap dealer; the swap dealer executes them for its own book, and provides you the return of your synthetic investment through a [[delta-one]] equity swap. Therefore: <br> | Here’s how it is: the [[swap dealer]] is the one you go to because of its market access, back-office systems and attractive financing. You place, or [[Equity give-up|give up]], your orders to the swap dealer; the swap dealer executes them for its own book, and provides you the return of your synthetic investment through a [[delta-one]] equity swap. | ||
Therefore: <br> | |||
(i) it (or its affiliates) will be the one that is hedging; <br> | (i) it (or its affiliates) will be the one that is hedging; <br> | ||
(ii) it will be the one having to make the determinations required of a {{eqderivprov|Determination Agent}} should there be some kind of [[Market Disruption Event - Equity Derivatives Provision|Market Disruption]], and it will be the one executing the opening and closing orders, using best execution, that are determined by the {{eqderivprov|Calculation Agent}}. If you want to control the price at which you trade, you can do that via a give-in (in the European market, anyway), or by placing a upper or lower limit on your order (at which point you risk your order being unfilled. Your remedy, should you not like the price you get, is to ''give your order to another broker next time''. | (ii) it will be the one having to make the determinations required of a {{eqderivprov|Determination Agent}} should there be some kind of [[Market Disruption Event - Equity Derivatives Provision|Market Disruption]], and <br> | ||
(iii) it will be the one executing the opening and closing orders, using best execution, that are determined by the {{eqderivprov|Calculation Agent}}. | |||
If you want to control the price at which you trade, you can do that via a give-in (in the European market, anyway), or by placing a upper or lower limit on your order (at which point you risk your order being unfilled. Your remedy, should you not like the price you get, is to ''give your order to another broker next time''. | |||
Revision as of 13:37, 9 May 2022
Compare Hedging Party, Determining Party and Calculation Agent — between them rich fodder for buy-side legal eagles to make a nuisance of themselves arguing the toss over plainly fatuous “potential” risks.
Here’s how it is: the swap dealer is the one you go to because of its market access, back-office systems and attractive financing. You place, or give up, your orders to the swap dealer; the swap dealer executes them for its own book, and provides you the return of your synthetic investment through a delta-one equity swap.
Therefore:
(i) it (or its affiliates) will be the one that is hedging;
(ii) it will be the one having to make the determinations required of a Determination Agent should there be some kind of Market Disruption, and
(iii) it will be the one executing the opening and closing orders, using best execution, that are determined by the Calculation Agent.
If you want to control the price at which you trade, you can do that via a give-in (in the European market, anyway), or by placing a upper or lower limit on your order (at which point you risk your order being unfilled. Your remedy, should you not like the price you get, is to give your order to another broker next time.