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Sell-side: Difference between revisions
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{{a|people|}}A [[broker]], [[dealer]] or [[market-maker]]: one given to offering financial services and products with a view to ''selling'' them — hence, the ''~-side'' — to the rapacious class of institutional investors and their agents and investment advisors whom, since they ''buy'' these things, we generally know as the “[[buy-side]]”. | {{a|people|}}A [[broker]], [[dealer]] or [[market-maker]]: one given to offering financial services and products with a view to ''selling'' them — hence, the ''~-side'' — to the rapacious class of institutional investors and their agents and investment advisors whom, since they ''buy'' these things, we generally know as the “[[buy-side]]”. | ||
Three important things to bear in mind about the [[sell-side]]: | |||
{{l1}}'''Dealers aspire to be market neutral''': Typically the sell-side dealers provide market exposure to customers without taking a market position themselves.<li> | |||
'''Dealers delta-hedge''': since a [[swap|swap contract]] is inherently a principal-to-principal contract and not an [[Agent|agency]] arrangement, and since entering it necessarily means the dealer ''does'' change its market position, the dealer will execute an offsetting [[delta-hedge]] in the market to “flatten out” that position.<li> | |||
'''Dealers are regulated''': Because their role tends to be systemically important and they aggregate a lot of risk taken on by their customers, dealers tend to be heavily regulated, both in terms of their conduct of business — with whom they can do business, and on what terms, and prudentially — in how they manage customer and market risk and how much capital they must hold. </ol> | |||
''If'' dealers fail, it tends to be more or less apocalyptic for the market. But the market is getting better at managing the stress of dealer failures ([[Credit Suisse]] caused a lot less dislocation than did [[Lehman]]), and in truth [[dealer]]s do not fail that often. | |||
{{sa}} | {{sa}} | ||
*[[Buy-side]] | *[[Buy-side]] | ||
*[[Horcrux]] | *[[Horcrux]] | ||
*[[Party A and Party B]] | *[[Party A and Party B]] | ||