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Since the advent of Section [[871(m)]] the practical value of the [[hypothetical broker-dealer]] language — to butress your argument that this really is a [[high-delta equity derivative]], and not a disguised cash trade, has diminished, but it has not vanished entirely, so I am afraid you will need to persevere with it. <br> | Since the advent of Section [[871(m)]] the practical value of the [[hypothetical broker-dealer]] language — to butress your argument that this really is a [[high-delta equity derivative]], and not a disguised cash trade, has diminished, but it has not vanished entirely, so I am afraid you will need to persevere with it. <br> | ||
{{{Difference between SES and MCA}} | {{LOSD under synthetic pb}} | ||
{{Difference between SES and MCA}} | |||
===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 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. | 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. |