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Commission is | {{g}}[[Commission]] is what the fee you pay to an [[agent]], who helps you conclude the {{t|contract}} without ever being part of the contractual chain. A [[broker]] may well be an agent on a securities sale or purchase — in which case you pay it a commission — but where it 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]]. | ||
===Rationale=== | ===Rationale=== | ||
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**'''Fee''': separately charge a fee, which may be labelled a “commission”. | **'''Fee''': separately charge a fee, which may be labelled a “commission”. | ||
===Example=== | |||
A real estate [[agent]] arranges a transaction between seller and buyer. Needless to say the agent doesn’t buy the house and on-sell it — so it is not in the [[contractual chain]] itself. Therefore the buyer pays the purchase price to the [[seller]], but the [[commission]] — which may be calculated on the sale price — to the [[agent]]<ref>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.</ref> | |||
===[[Delta-one]] [[Swap|swaps]]=== | ===[[Delta-one]] [[Swap|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]]. | 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?==== | ====Does it really matter?==== | ||
[[ | The [[JC]]’s house view is that “a rose is a rose, and by any other name smells just as sweet” — putting it another way, who honestly gives a toss? — but the answer to that question is “[[tax lawyer]]s”, and they aren’t so well-read.<ref>Heaven only knows what passes for literature for tax inspectors. [[Tolley’s Tax Handbook]], probably.</ref> | ||
{{ | {{sa}} | ||
*[[Agent]] | *[[Agent]] | ||
*[[Principal]] | *[[Principal]] | ||
*[[Riskless principal]] | *[[Riskless principal]] | ||
{{ref}} | |||