Equity Structured Product Trade
The equity structured product trade from Chapter 4 (Figure 6.4) involves two different market makers. The term “market maker” is a slightly interesting term to use here because the equity options trader is a market maker, but the funding department is rarely considered a market maker when it borrows money. Externally, when it needs to borrow money, it generally borrows at the price where the financial market allows, like every other debt issuer, as opposed to the price it sets itself. However, for this trade, it is telling the trader where it is prepared to borrow money.
FIGURE 6.4 Equity structured product trade overview.
Two other points make this an interesting transaction. The first is that the market makers ...
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