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-===“Why should I pay your hedging costs? I have no control over them” argument is bogus===
+===The bogus “why should I pay your hedging costs? I have no control over them” argument===
-Sniffy buyside counsel — especially ISDA specialists who have adapted to [[PB]] without really understanding it, might try the your hedging costs are your problem line. It's bogus. [[Synthetic PB]] is just [[cash brokerage]] done with [[derivatives]]. The client would wear them in a cash trade — the format of the transaction shouldn’t make a difference.
+Sniffy [[buy-side|buyside]] [[counsel]] — especially hardcore ISDA specialists who are new to [[PB]] and don’t yet really understand it, might try suggesting a [[dealer]]’s hedging costs are its problem. This argument is bogus. [[Synthetic PB]] is just [[cash brokerage]] done with [[derivatives]] — the [[dealer]] hedges [[delta-one]] and has no skin in the game as it is simply executing a client order. The client would wear such costs in a cash trade — the [[dealer]] is an agent, after all — and the format of the transaction doesn’t make a difference. Okay: a [[Counterparty|swap counterparty]] is not in any legal sense an [[agent]] — that is axiomatic — but the trade is [[riskless principal]], which is agency from an economic perspective.
-*The [[broker]] owes [[best execution]]. That means it has to interrogate all venues and get the best possible price.
+*The [[dealer]] owes [[best execution]]. That means, (subject to contrary instructions) it has to interrogate all [[venue]]s and get the best possible price.
-*Under [[best execution]] rules the client may instruct the broker to exclude certain venues and brokers.
+*Under [[best execution]] rules the client may instruct the [[dealer]] to exclude certain [[venue]]s and [[dealer]]s.
-*To comply with best execution, the broker must configure its [[order router]] to accommodate the client’s preferences.
+*To comply with best execution, the [[dealer]] must configure its [[order router]] to accommodate the client’s preferences.
-*But excluding a venue impacts the quality of the available execution (whenever the excluded venue had the best price, you’d miss it).
+*But excluding a [[venue]] impacts the quality of the available execution (whenever the excluded [[venue]] had the best price, you’d miss it).
-*By not excluding the venue, therefore, you ''benefit'' from the venue being present (as long as it doesn’t fail) every order you place.
+*By not excluding the [[venue]], therefore, you ''benefit'' from the [[venue]] being present (as long as it doesn’t fail) every order you place.
 *Trades settle [[DVP]] so there is [[market risk]] in replacing the trade, not [[credit risk]].
-*The market risk could be significant: failure of a venue will heavily impact [[liquidity]] and market [[volatility]] for a period.
+*The market risk could be significant: failure of a [[venue]] will heavily impact [[liquidity]] and market [[volatility]] for a period.
-*Asking the broker to underwrite a market loss when a venue or [[intermediate broker]] fails while getting the benefit its best pricing as long as it does not is asking for a free option on your own execution risk.
+*Asking the [[dealer]] to underwrite a market loss when a [[venue]] or [[intermediate broker]] fails while getting the benefit its best pricing as long as it does not is asking for a free option on your own execution risk.