82,853
edits
Commercial imperative: Difference between revisions
Jump to navigation
Jump to search
no edit summary
Amwelladmin (talk | contribs) No edit summary |
Amwelladmin (talk | contribs) No edit summary |
||
| Line 24: | Line 24: | ||
===[[Dick move]]s=== | ===[[Dick move]]s=== | ||
Now, during your relationship, you may, if the fancy takes you, indulge in what we might call | Now, during your relationship, you may, if the fancy takes you, indulge in what we might call “[[dick move]]s”.<ref>In fairness, your client might pull the odd [[dick move]], too. Especially if it is a [[hedge fund]]. For certain kinds of [[hedge fund]]s, [[dick move]]s are part of the business model.</ref> You might seek to exploit the literal wording of a {{t|contract}} even though you both know your commercial intention in entering it was something else. | ||
There are (at least) two kinds of [[dick move]]s: | There are (at least) two kinds of [[dick move]]s: | ||
*'''Mistrades''': [[Dick move]]s that arise from a misconception between the parties on a transaction: your expectation and your client’s about the commercial intention were different. [[Cheapest to deliver]] options in [[credit derivatives]] are this kind of [[dick move]]. Your client sees a Triple A [[Ratings notches|rating]] eligibility criteria — woo hoo! — and sees in it impeachable credit. You look at it and see some overworked grad at Moody’s who doesn’t understand correlation risk and has handed you an opportunity to dump the crappiest, most poorly risked, implausibly rated bonds that you can find into your portfolio.<ref>Once upon a time there were plenty. They all wound up in CDO<sup>3</sup> deals.</ref> | *'''Mistrades''': [[Dick move]]s that arise from a misconception between the parties on a transaction: your expectation and your client’s about the commercial intention were different. [[Cheapest to deliver]] options in [[credit derivatives]] are this kind of [[dick move]]. Your client sees a Triple A [[Ratings notches|rating]] eligibility criteria — woo hoo! — and sees in it impeachable credit. You look at it and see some overworked grad at Moody’s who doesn’t understand correlation risk and has handed you an opportunity to dump the crappiest, most poorly risked, implausibly rated bonds that you can find into your portfolio.<ref>Once upon a time there were plenty. They all wound up in CDO<sup>3</sup> deals.</ref> | ||
*'''“Tent-peg” mistrades''': A [[broker]] servicing its client is somewhat [[short an option]] — the one that arises because ''the client is always right'' — and as a consequence will write in ''ostensibly'' outrageous legal protections, which it never intends to use | *'''“Tent-peg” mistrades''': A [[broker]] servicing its client is somewhat [[short an option]] — the one that arises because ''the client is always right'' — and as a consequence will write in ''ostensibly'' outrageous legal protections ([[indemnities]], [[hold harmless]]es and so on) which it never intends to use by way of defensive strategy to spike the client’s temptation to take advantage of its supine broker and pull a [[dick move]]. | ||
===Legal risk=== | ===Legal risk=== | ||
At the start of your relationship, the value of the three | At the start of your relationship, you won’t know the value of the three Xs. That is when you, your counterparty, and your respective battalions of [[lawyers]] will go through the unedifying ritual of {{t|contract}} [[negotiation]]. The [[legal eagle]]s will agonise four weeks on the potential import of legal terms. “Does ''[[under]]'' really mean the same thing as ''[[In accordance with|pursuant to and in accordance with]]''?” This kind of thing. It’s awesome fun. Most of the arguments will concern circumstances which are almost certain never to occur and, if they do, will be utterly destructive of Future X in any case. The [[insolvency]] of the parties, for example. It is all very tedious, but those of a certain disposition seem to enjoy it. We write about them a lot on this site. | ||
In any case arguing about these semantics will delay the start of the Historical X period. | In any case arguing about these semantics will delay the start of the Historical X period. | ||
{{ref}} | {{ref}} | ||