Template:Calculation agent dispute: Difference between revisions

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-===Should you include a dispute right for determinations made by the calculation agent?===
+===A dispute right for {{eqderivprov|Calculation Agent}} and {{eqderivprov|Determining Party}} determinations?===
-Recognising that “should you?”, and “will you have to?”, are different questions — [[Mediocre lawyer|truculent buyside counsel]] may insist, using [[illegitimate oratorial techniques]], and you may ultimately decided not to [[die in a ditch]] about it, however much it pains you — recognising all that; here — if you are doing [[synthetic equity prime brokerage]] business — is how it rolls.
+Recognising that “should you?”, and “will you have to?”, are different questions — [[buyside counsel]] may insist, using [[canards a l’orange|their regular platter of exotic preparations of ''canard'' that buyside lawyers always serve up]], and you may ultimately decided not to [[die in a ditch]] about it, however much it pains you — recognising all that; here — if you are doing [[synthetic prime brokerage]] business — is how it rolls.
-'''[[Client]]’s lawyer''': ''we must have a dispute right so help me''.
+'''[[Client]]’s lawyer''': ''we must have a dispute right, so help me''.
 *The [[Dealer]] will be the {{eqderivprov|Calculation Agent}}. (''True''.)
 *The [[Dealer]] will be the {{eqderivprov|Hedging Party}}. (''True''.)
 *The [[Dealer]] will be the {{eqderivprov|Determining Party}}.  (''True''.)
-*[[Dealer]]s are bad, venal people. They have blackened hearts and will stop at nothing to rip their [[client]]s’ faces off. We need some check on their unfettered and sure-to-be outrageously exercised discretion. (''A matter of debate and, to be sure, recent history has not looked kindly on the goings on in some dealers, but if that’s your starting point a far better question is “why are you doing business with such a [[Non mentula esse|vassal]] in the first place”?'')
+*[[Dealer]]s are bad, venal people. They have blackened hearts and will stop at nothing to rip their [[client]]s’ faces off. We need ''some'' check on their unfettered and sure-to-be outrageously exercised discretion. (''A matter of debate and, to be sure, recent history has not looked kindly on the goings on in ''some'' dealers, but if that’s your starting point a far better question is “why are you doing business with such a [[Non mentula esse|rascal]] in the first place”? And generally, hedge funds haven’t had a spotless track record either, have they? For every [[Lehman]], there’s been an [[LTCM]], [[Amaranth]], [[Archegos]], SAC, Galleon and, er, [[Madoff]].'')
-'''The [[Dealer]]’s lawyer''': Look, dudes you seem to be missing the point.
+'''The [[Dealer]]’s lawyer''': Look, dudes, you seem to be missing the point.
-*Firstly, This is [[synthetic prime brokerage]]. It isn't an arm’s length trading arrangement. It is business facilitation for you. When we hedge, we are ''[[delta]] neutral''. That means if our [[hedge]] pays 50, we pay you 50. So firstly, we can’t rip your face off.
+*Firstly, This is [[synthetic prime brokerage]]. It isn’t an arm’s length trading arrangement. It is business facilitation for you. When we hedge, we are ''[[delta]] neutral''. That means if our [[hedge]] pays ''us'' 50, ''we'' pay ''you'' 50. So firstly, we ''can’t'' rip your face off, even though it is one only a mother could love.
 *Secondly, we are owe you [[best execution]]<ref>Admittedly this only holds if the [[Dealer]] ''does'' owe best execution, but if it is {{tag|MiFID}}-regulated and you are a [[professional client]], it will.</ref>
-*Thirdly, because we delta-one]] hedge, we come up with our {{eqderivprov|Determination Agent}} “determination” by actually selling the right number of shares. It isn’t like we confect some hypothetical valuation based on a model some geek in correlation trading built in [[excel]]. We don't go ask some stooge dealers for a soft estimate, and promise them champagne in the mail. We ''actually sell the stock''. Our own money out the door. We can't get it back. What you are asking is to second guess that actual transaction by ''you'' being able to appoint some stooge dealer for a soft estimate.
+*Thirdly, because we [[delta-one|delta]] hedge, we come up with our “determinations” by ''actually selling the right number of shares''. It isn’t like we confect some hypothetical valuation based on a model some geek in correlation trading built in [[excel]]. We don’t go ask some stooge dealers for a soft estimate, and promise them champagne in the mail. We ''actually sell the stock''. Our own money out the door. We can’t get it back. What you are asking is to second guess our actual transaction by ''you'' asking some stooge dealer for a soft estimate. This is like putting a bet on Crystal Palace to beat Scunthorpe and when Palace loses, telling the bookmaker: “but my buddy is a football expert, and he says Palace were dead unlucky, hit the crossbar a couple of times, and that Scunthorpe goal should have been disallowed, so really it should have been a 4:0 win to Palace. So you have to pay me anyway.”
 *Fourthly, there are a ton of controls on us already, contractual, regulatory and economic:
-**'''Contractual''': Section {{eqderivprov|12.8}} of the {{eqderiv}} (especially Sections  {{eqderivprov|12.8(b)}} and {{eqderivprov|12.8(g)}}) is shot through with requirements to act in a [[commercially reasonable manner]], using {{eqderivprov|commercially reasonable procedures}}, going out to leading dealers and so on. Likewise, a whenever a {{eqderivprov|Calculation Agent}} is acts or exercises judgment in any way, it must do so in [[good faith]] and in a [[commercially reasonable manner]] (See Section {{eqderivprov|1.40}}). What the dispute provision is aimed to do, your adversary will say, is provide a stick to ''enforce'' that obligation. but at some point this becomes an infinite regression: what if the dispute is not registered in good faith? Where is the stick to enforce ''that''?
+**'''Contractual''': Section {{eqderivprov|12.8}} of the {{eqderiv}} (especially Sections  {{eqderivprov|12.8(b)}} and {{eqderivprov|12.8(g)}}) is shot through with requirements to act in a [[commercially reasonable manner]], using {{eqderivprov|commercially reasonable procedures}}, going out to leading dealers and so on. Likewise, a whenever a {{eqderivprov|Calculation Agent}} is acts or exercises judgment in any way, it must do so in [[good faith]] and in a [[commercially reasonable manner]] (See Section {{eqderivprov|1.40}}). What the dispute provision is aimed to do, your adversary will say, is provide a stick to ''enforce'' that obligation. but at some point this becomes an infinite regression: what if the dispute is not registered in [[good faith]]? Where is the stick to enforce ''that''?
-**'''Regulatory''': There's the best execution obligation. The COBS rules require us to treat our clients fairly.
+**'''Regulatory''': There's the best execution obligation. The [[COBS]] rules require us to treat our clients fairly.
 **'''Economic''': You are the ''[[client]]''. You can pull your business. You can decide to never give us another trade. Seeing as we are [[delta-one]] hedged, we have no incentive at all to lowball, and every incentive to give you the best price we can manage.