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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.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).
The {{plainlink|https://www.theia.org|AI||}} (the Investment Association).
====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.
====“Dealer” versus “broker”====
Swaps are inherently principal contracts, so the [[sell-side]] participant in a swap is always a “[[dealer]]”. ([[Broker]]s act as [[agent]]s to put a buyer and a seller together and charge a [[commission]]. [[Dealer]]s act as [[principal]], buying from a seller, and on-selling to a buyer, but the economic upshot of what they do in either case is the same.)
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>
'''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.
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.


===The preamble===
===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 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 {{{{{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>
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