Difference between revisions of "Anticipatory Hedging"

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== Controversy ==
 
== Controversy ==
Controversey arose surrounding the topic after the UK’s [[Financial Services Authority]] fined the [[Deutsche Bank]] subsidiary [[Morgan Grenfell]] £190,000 (E279,923) for “pre-hedging a programme trade that ultimately disadvantaged its customer” in April 2004. Some contended the market began to fall  into two distinct camps: those that do not pre-hedge and want it outlawed and those that do but refuse to speak publicly on the issue.
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Controversey arose surrounding the topic after the UK’s [[Financial Services Authority]] fined the [[Deutsche Bank]] subsidiary [[Morgan Grenfell]] £190,000 (E279,923) for “pre-hedging a programme trade that ultimately disadvantaged its customer” in April 2004. Some contended the market began to fall  into two distinct camps: those that do not pre-hedge and want it outlawed and those that do but refuse to speak publicly on the issue.<ref>{{cite web|url=http://www.epn-magazine.com/news/fullstory.php/aid/1773/Pre-hedging_divides_the_transition_industry.html|name=Pre-Hedging Divides the Transition Industry|org=European Pensions and Investment News|date=June 20, 2008}}</ref>
  
  

Revision as of 08:06, 20 June 2008


The partial or complete execution of a hedge transaction prior to execution of the actual position. This activity is subject to regulatory requirements that differ among products, exchanges, and regulatory authorities. It's also called a long hedge.[1]

Practice

Template:Infobox Midpage Need Sponsor Right If allowed, a trader may choose to execute a partial or complete hedge to a trade prior to execution of that trade. This 'pre-hedge' reduces the risk to the executing firm by shifting market impact to the customer and other market participants involved in the security.

Controversy

Controversey arose surrounding the topic after the UK’s Financial Services Authority fined the Deutsche Bank subsidiary Morgan Grenfell £190,000 (E279,923) for “pre-hedging a programme trade that ultimately disadvantaged its customer” in April 2004. Some contended the market began to fall into two distinct camps: those that do not pre-hedge and want it outlawed and those that do but refuse to speak publicly on the issue.[2]



References

Support Against

  1. Anticipatory Hedge. AMEX/Swiss Bank Corp..
  2. Pre-Hedging Divides the Transition Industry. European Pensions and Investment News.