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{{how Equity Notional Reset works}} | {{how Equity Notional Reset works}} | ||
===Types of return when referencing futures=== | |||
{{Type of Return and swaps on futures}} | |||
===Shorts, longs and flexi-transactions=== | |||
Now as you know, the {{isdama}} is a bilateral construct — In a funny way, a bit [[Bob Cunis]] like that — and while the [[equity derivatives]] market is largely conducted between dealers and their clients, this doesn’t mean the [[dealer]] is always the {{eqderivprov|Equity Amount Payer}}. The client — as often as not, a [[hedge fund]] — is as likely to be taking a [[short]] position — [[locusts]], right? — as a [[long]] one. One does this by reversing the roles of the parties in the {{eqderivprov|Confirmation}}: The {{eqderivprov|Equity Amount Payer}} for a ''[[long]]'' transaction will be a [[Swap dealer|dealer]]. The {{eqderivprov|Equity Amount Payer}} for a ''[[short]]'' transaction will be the [[Hedge fund|fund]]. | |||
So much so uncontroversial. But then there are flexi-transactions: in these modern times of [[high-frequency trading]], [[unique transaction identifier]]s and [[Trade reporting|trade]] and [[transaction reporting]], [[dealer]]s and their clients are increasingly interested in consolidating the multiple trade impulses they have on the same underlyer into single positions and single transactions: this makes reconciling reporting far easier, and also means you don’t have to be assigning thousands of [[UTI]]s every day — at a couple of bucks a throw — to what is effectively a single stock position. | |||
What does this have to do with {{eqderivprov|Equity Notional Amount}}s? Well, the {{eqderivprov|Equity Notional Amount}} of that single “position” transaction is now a moving target. A ''short'' trade impulse on a (larger) existing long position will reduce the {{eqderivprov|Equity Notional Amount}}, but it won’t necessarily change who is the {{eqderivprov|Equity Amount Payer}}, ''unless the total notional of the position flips from positive to negative''. Then it will. This is kind of weird if you stand back and look at it from a stuffy, theoretical point of view, but once you slip into that warm negligee of pragmatism in which almost all [[legal eagles]] love to drape themselves, you get over it. | |||
Well, I did, anyway. | |||