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Synthetic prime brokerage: Difference between revisions
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===How [[synthetic equity swaps]] are traded=== | ===How [[synthetic equity swaps]] are traded=== | ||
Unlike other derivatives, synthetic equity trades a lot like a [[cash equity]]: The client goes to a [[equity broker]] to get a firm indication, | Unlike other derivatives, synthetic equity trades a lot like a [[cash equity]]: The client goes to a [[equity broker]] to get a [[firm price]] indication, the [[broker]] then “[[gives up]]” this thing that wasn’t actually an order in the first place (it’s complicated: see the box) to the [[prime broker]] who then, at the client's request, writes the swap at the price directed by the [[hedge fund]]. So the swap provider, which lives in the [[prime brokerage]] business, really is a glorified custodian. Cruel people would say that’s not a bad description of a [[prime broker]], come to think of it. | ||
A client can close out its [[synthetic equity swap]] in exactly the same way: it obtains a firm price from an executing broker, instruct the closure of the swap at that price, and indicate that the [[PB]] can sell its hedge to the [[executing broker]]. | |||
{{box| | {{box| | ||
'''About give-ups''' <br> | '''About give-ups''' <br> | ||
{{Equity giveup}} | {{Equity giveup}} | ||
}} | }} | ||
===Common points of dispute when negotiating a for [[synthetic equity swap]] [[master confirmation]] === | |||
*'''I want to be co-calculation agent''': | |||
*'''I want a right to dispute your calculations''': See “I want to be co-calculation agent | |||
*'''You can change initial margin whenever you like? What's that all about? | |||
'''*'''What do you mean you want a thirty day termination right? | |||
'''*'''{{eqderivprov|Hypothetical broker-dealer}}. What’s all ''that'' about?''' | |||