Template:Isda Preamble summ: Difference between revisions

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====A word on industry associations====
====A word on industry associations====
=====Sell-side=====
ISDA, which publishes the ISDA, ''was'' the “International Swap Dealers Association''s'', Inc.” — interesting plural, that — but in any case, outwardly a ''[[sell-side]]'' industry association. Sometime between 1992 and 2002, it rebranded itself as the “International Swaps and Derivatives Association, Inc.”: singular, at the same time more unitary and more inclusive sounding, but still in spirit the same old ISDA, stake-held predominantly by the largest broker-dealers on the face of the Earth.  
ISDA, which publishes the ISDA, ''was'' the “International Swap Dealers Association''s'', Inc.” — interesting plural, that — but in any case, outwardly a ''[[sell-side]]'' industry association. Sometime between 1992 and 2002, it rebranded itself as the “International Swaps and Derivatives Association, Inc.”: singular, at the same time more unitary and more inclusive sounding, but still in spirit the same old ISDA, stake-held predominantly by the largest broker-dealers on the face of the Earth.  


It may have aspirations to conquer the world — increasingly, it seems hell-bent on doing so, encroaching on the commodities, carbon, securities financing and crypto domains — but for now ISDA remains a “dealer-community” association, largely devoted to the swap.  
It may have aspirations to conquer the world — increasingly, it seems hell-bent on doing so, encroaching on the commodities, carbon, securities financing and crypto domains — but for now ISDA remains a “dealer-community” association, largely devoted to the swap.  
=====Buy-side=====
These days the “buy-side lobby” is bigger, more organised and better represented than it used to be, with the following associations representing its interests:


{{plainlink|https://www.aima.org|AIMA|}} (the Alternative Investment Management Association)<br> {{plainlink|https://www.efama.org|EFAMA|}} (the European Fund and Asset Management Association) <br>
The {{plainlink|https://www.managedfunds.org|MFA|}} (the Managed Funds Association) — not to be confused, by the way, with the Fund Management Association of Kenya — and<br>
The {{plainlink|https://www.theia.org|AI||}} (the Investment Association).
====Buy-side and sell-side====
====Buy-side and sell-side====
We will have more to say about this [[The bilaterality, or not, of the ISDA|in later essays]], but for the time being note that in most swap transactions there is a “sell-side” dealer and a “buy-side” end user to an {{isdama}}. There is, it is true, a small class of “inter-dealer” swap contracts, but these generally do not create quite the same excitement as do those between dealers and their customers.
We will have more to say about this [[The bilaterality, or not, of the ISDA|in later essays]], but for the time being note that in most swap transactions there is a “sell-side” dealer and a “buy-side” end user to an {{isdama}}. There is, it is true, a small class of “inter-dealer” swap contracts, but these generally do not create quite the same excitement as do those between dealers and their customers.
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Three important things to bear in mind about swap [[dealer]]s:
Three important things to bear in mind about swap [[dealer]]s:
{{l1}}'''They aspire to be market neutral''': Typically dealers provide market exposure to customers without taking a market position themselves.<li>
{{l1}}'''They aspire to be market neutral''': Typically dealers provide market exposure to customers without taking a market position themselves.<li>
'''They delta-hedge''': since a [[swap]] is inherently a principal-to-principal contract and not an [[Agent|agency]] arrangement, and entering ''does'' change the dealer’s market position, the dealer will execute offsetting [[delta-hedge]]s in the market to “flatten out” its position. It has quite a lot of flexibility in how it does this.<li>
'''They delta-hedge''': since a [[swap]] is inherently a principal-to-principal contract and not an [[Agent|agency]] arrangement, and entering ''does'' change the dealer’s market position, the dealer will execute offsetting [[delta hedge|delta-hedge]]s in the market to “flatten out” its position. It has quite a lot of flexibility in how it does this.<li>
'''Dealers are regulated''': Because they are concentrated points of risk taken on by their customers, dealers are 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. Their customers may be somewhat regulated, if they are investment funds, but generally the regulation is there to protect the “[[Ultimate client|ultimate client]]” a mythical grandpop who wants nothing more than to dandle his granddaughter on his knee while she blows upon a dandelion, and warm beams of sunshine bathe them all in holy light. </ol>
'''Dealers are regulated''': Because they are concentrated points of risk taken on by their customers, dealers are 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.  
 
Some swap customers are regulated, in particular those who manage retail investment funds but generally the regulation is there to protect the “[[Ultimate client|ultimate client]]” a mythical grandpop who wants nothing more than to dandle his granddaughter on his knee while she blows upon a dandelion, and warm beams of sunshine bathe them all in holy light. </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.
''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.


====Buy-side trade associations====
===The preamble===
These days the “buy-side lobby” is a lot bigger, more organised and better represented than it used to be, with AIMA (the Alternative Investment Management Association),<ref>https://www.aima.org</ref> EFAMA (the European Fund and Asset Management Association,<ref>https://www.efama.org</ref> the MFA (the Managed Funds Association),<ref>https://www.managedfunds.org</ref> (not to be confused, by the way, with the Fund Management Association of Kenya) and the IA (the Investment Association),<ref>https://www.theia.org</ref> representing their interests.
The {{{{{1}}}|preamble}} is just the loosener before things get properly going, and there is not a lot to see. It has not changed a lot between the {{1992ma}} and the {{2002ma}} (nor indeed, from the {{1987ma}}, except that the {{isdaprov|Single Agreement}} clause got promoted from a casual remark during the warm-up, in the {{1987ma}}, to the first searching delivery of the first over.<ref>Cricket metaphor. To our American readers, we would say sorry, except that we are not. There will be cricket analogies throughout.</ref>
 
====The preamble====
The {{ {{{1}}}|preamble}} is just the loosener before things get properly going, and there is not a lot to see. It has not really changed a lot between the {{1992ma}} and the {{2002ma}} (nor indeed, from the {{1987ma}}, except that the {{isdaprov|Single Agreement}} clause got promoted from a casual remark during the warm-up, in the {{1987ma}}, to the first searching delivery of the first over.<ref>Cricket metaphor. To our American readers, we would say sorry, except that we are not. There will be cricket analogies throughout.</ref>

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