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Template:Calculation agent dispute (view source)
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=== | ===A dispute right for {{eqderivprov|Calculation Agent}} and {{eqderivprov|Determining Party}} determinations?=== | ||
Recognising that “should you?”, and “will you have to?”, are different questions — [[Mediocre lawyer|truculent buyside counsel]] may insist, using [[illegitimate oratorial techniques]], and you may ultimately decided not to [[die in a ditch]] about it, however much it pains you — recognising all that; here — if you are doing [[synthetic | Recognising that “should you?”, and “will you have to?”, are different questions — [[Mediocre lawyer|truculent buyside counsel]] may insist, using [[illegitimate oratorial techniques]], and you may ultimately decided not to [[die in a ditch]] about it, however much it pains you — recognising all that; here — if you are doing [[synthetic prime brokerage]] business — is how it rolls. | ||
'''[[Client]]’s lawyer''': ''we must have a dispute right so help me''. | '''[[Client]]’s lawyer''': ''we must have a dispute right, so help me''. | ||
*The [[Dealer]] will be the {{eqderivprov|Calculation Agent}}. (''True''.) | *The [[Dealer]] will be the {{eqderivprov|Calculation Agent}}. (''True''.) | ||
*The [[Dealer]] will be the {{eqderivprov|Hedging Party}}. (''True''.) | *The [[Dealer]] will be the {{eqderivprov|Hedging Party}}. (''True''.) | ||
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'''The [[Dealer]]’s lawyer''': Look, dudes you seem to be missing the point. | '''The [[Dealer]]’s lawyer''': Look, dudes you seem to be missing the point. | ||
*Firstly, This is [[synthetic prime brokerage]]. It | *Firstly, This is [[synthetic prime brokerage]]. It isn’t an arm’s length trading arrangement. It is business facilitation for you. When we hedge, we are ''[[delta]] neutral''. That means if our [[hedge]] pays 50, we pay you 50. So firstly, we can’t rip your face off. | ||
*Secondly, we are owe you [[best execution]]<ref>Admittedly this only holds if the [[Dealer]] ''does'' owe best execution, but if it is {{tag|MiFID}}-regulated and you are a [[professional client]], it will.</ref> | *Secondly, we are owe you [[best execution]]<ref>Admittedly this only holds if the [[Dealer]] ''does'' owe best execution, but if it is {{tag|MiFID}}-regulated and you are a [[professional client]], it will.</ref> | ||
*Thirdly, because we delta-one]] hedge, we come up with our | *Thirdly, because we [[delta-one|delta]] hedge, we come up with our “determinations” by ''actually selling the right number of shares''. It isn’t like we confect some hypothetical valuation based on a model some geek in correlation trading built in [[excel]]. We don’t go ask some stooge dealers for a soft estimate, and promise them champagne in the mail. We ''actually sell the stock''. Our own money out the door. We can’t get it back. What you are asking is to second guess our actual transaction by ''you'' asking some stooge dealer for a soft estimate. | ||
*Fourthly, there are a ton of controls on us already, contractual, regulatory and economic: | *Fourthly, there are a ton of controls on us already, contractual, regulatory and economic: | ||
**'''Contractual''': Section {{eqderivprov|12.8}} of the {{eqderiv}} (especially Sections {{eqderivprov|12.8(b)}} and {{eqderivprov|12.8(g)}}) is shot through with requirements to act in a [[commercially reasonable manner]], using {{eqderivprov|commercially reasonable procedures}}, going out to leading dealers and so on. Likewise, a whenever a {{eqderivprov|Calculation Agent}} is acts or exercises judgment in any way, it must do so in [[good faith]] and in a [[commercially reasonable manner]] (See Section {{eqderivprov|1.40}}). What the dispute provision is aimed to do, your adversary will say, is provide a stick to ''enforce'' that obligation. but at some point this becomes an infinite regression: what if the dispute is not registered in good faith? Where is the stick to enforce ''that''? | **'''Contractual''': Section {{eqderivprov|12.8}} of the {{eqderiv}} (especially Sections {{eqderivprov|12.8(b)}} and {{eqderivprov|12.8(g)}}) is shot through with requirements to act in a [[commercially reasonable manner]], using {{eqderivprov|commercially reasonable procedures}}, going out to leading dealers and so on. Likewise, a whenever a {{eqderivprov|Calculation Agent}} is acts or exercises judgment in any way, it must do so in [[good faith]] and in a [[commercially reasonable manner]] (See Section {{eqderivprov|1.40}}). What the dispute provision is aimed to do, your adversary will say, is provide a stick to ''enforce'' that obligation. but at some point this becomes an infinite regression: what if the dispute is not registered in [[good faith]]? Where is the stick to enforce ''that''? | ||
**'''Regulatory''': There's the best execution obligation. The COBS rules require us to treat our clients fairly. | **'''Regulatory''': There's the best execution obligation. The [[COBS]] rules require us to treat our clients fairly. | ||
**'''Economic''': You are the ''[[client]]''. You can pull your business. You can decide to never give us another trade. Seeing as we are [[delta-one]] hedged, we have no incentive at all to lowball, and every incentive to give you the best price we can manage. | **'''Economic''': You are the ''[[client]]''. You can pull your business. You can decide to never give us another trade. Seeing as we are [[delta-one]] hedged, we have no incentive at all to lowball, and every incentive to give you the best price we can manage. | ||