Against Actual

  

It might sound like an irrational dedication to fantasy. But it really has to do with commodities trading.

In commodities, an "actual" is the physical thing getting traded. Oil, gold, soybeans, pork bellies, etc. However, not all commodities trading involves buying and selling actuals. Much of the action takes place on the derivatives market, where traders speculate in the prices of various commodities, but have no intention of ever receiving, say 1,000 barrels of oil or a bunch of pig meat.

"Against Actual" is a type of trade that avoids the physical delivery. In the transaction, two parties with opposite positions in a commodity make a deal to use each other to close out their contracts simultaneously. A person with a buy-side contract and one with a sell-side contract let the two cancel each other out. That way, no one has to ship any pork to anyone else.

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Finance: What is a Sell Side Analyst?1 Views

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finance a la shmoop what is a sell side analysts all right well they're the

00:08

brains of a stock brokerage more or less brokers essentially rent those brains to [Brain in a jar]

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by side investors like hedge and mutual funds and wealthy family office

00:18

investors hoping that the genius insights of that sell side analysts will

00:23

entice the buy ciders to invest through the brokerage generating kindly loving [Bysider people standing by brain in a jar]

00:30

Commission's for the brokers got it in practice much investment banking and

00:34

corporate finance work is also generated via the reports created by that vaunted [Investment banking report document appears]

00:39

sell-side analysts and you can imagine if you're the CEO of itty bitty city

00:44

Corp comm and you read a glowing report from a sell side analysts who views your

00:50

stock today as a bargain at 12 bucks a share and puts in writing that they

00:54

think it'll be over a hundred bucks a share in three years if you were in fact

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to do an offering like a selling stock or debt in your company well you'd

01:04

probably hire the firm who loved you above all other banks [Love hearts appear from bank building]

01:07

pushing you to hire them right that is you'd hire the bank who had a strong buy

01:12

on your stock long before you'd hire the one telling Wall Street to short you

01:16

well sell side analysts in theory are the investing whisperer of Wall Street [Young girl whispers in girls ear]

01:20

they don't actually pull the trigger and actually invest and live or die by their

01:25

own investment decisions instead they simply point out observations they've

01:30

made with dotted line recommendations to their constituency meaning the people

01:34

who read their reports as to what stocks to buy sell or hold well until

01:39

Regulation FD or full disclosure came along which required broad and full

01:43

disclosure of company information to their entire investing community all at

01:47

once sell side analysts were actively courted by the buy side so that the buy [Phone rings]

01:52

cider would be the first phone call from that sell side analysts when they were

01:56

gonna upgrade or downgrade a given security and then that buy cider could [Hedge fund manager answers phone]

02:00

buy it ahead of the rest of the world and make a quick buck or a few points

02:05

you know here and there the role was largely lambasted by regulators when it

02:09

came to light that some 95% of all investing recommendations

02:13

were a buy or strong buy with the sell-side analysts being urged [Cash placed on table by brain in a jar]

02:17

aggressively by the investment bankers who paid her to write glowing loving

02:22

things about the companies she covered well the result was more or less the end

02:26

of the sell-side analysts as a trusted respected role on Wall Street today

02:31

those once lucrative many million dollar-a-year jobs now receive anemic [Cash appears]

02:36

pay with anemic influence in a world where the buy-side simply stopped

02:40

trusting and/or listening to the recommendations of its brokers and [Girl cries and man walks away]

02:44

viewed the structure of the relationship as purely a utilitarian functionary one

02:49

where the job of the broker was to get the buyer the block of stock at the [Man with sack of stocks]

02:52

cheapest price possible that's it no frills so ya sell side analysts aren't

02:57

what they used to be which you know if you were on the itty-bitty City

03:01

Committee [Man throws cash into trash can]

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