What Is Give-Up?
In securities and commodities trading, give-up occurs when one executing broker places a deal for another. A “give-up” occurs when the broker making the trade relinquishes credit for the transaction on the books. Brokers often quit since they cannot place a transaction for a customer due to job responsibilities. A give-up may occur if the original broker represents an interdealer or prime broker.
Understanding Give-Up Trades
Financial market traders no longer give up. Before computerized trading, giving up was more common. During floor trading, brokers may not be able to attend; thus, another broker would place the deal as a proxy. Trades in another broker’s name are usually part of a planned give-up arrangement. Prearranged trade agreements usually contain compensation and give-up processes. Give-up deals are rare since payment is unclear without a negotiated agreement.
Giving Up vs. Giving In
A give-in is accepting a give-up exchange. An executed give-up bargain is a give-in. Not often is “give in” used.
Parties to Trade
Give-up trades include three participants. These parties are the executing broker (Party A), the client’s broker (Party B), and the opposing broker (Party C). Only the buying and selling brokers are involved in a conventional deal. A give-up requires another trader (Party A).
In give-up trades, a fourth party can participate if both brokers are necessary. If the purchasing and selling brokers seek different traders to operate on their behalf, both sides will give up.
We ask Party A to place the deal with Party B to guarantee timely execution. A give-up deal appears in the trade log for the client’s broker (Party B). The trade record does not mention that Party A conducted the transaction for Party B.
Compensation agreements usually govern give-up deals. Part A, the executing broker, may get the typical transaction spread. The non-floor brokers pay the executing brokers a retainer or per-trade commission. Broker B may or may not include this complete payment to the executing broker in his client commission.
Give-Up Trade Example
Broker B receives a customer order to purchase 100 XYZ shares on the NYSE. Broker B must deliver the order from a significant brokerage business upstairs to the NYSE floor. Broker B requests Floor Broker A in order to expedite the deal. Floor Broker A buys the shares for Broker B’s customer.
Floor Broker A must relinquish the trade and record it as if Broker B made it. Instead of Broker B and Floor Broker A, I completed the trade.
Give up Prime Brokerage?
Prime brokerages are a set of services banks provide to large clients, such as institutional investors and hedge funds. Clients will trade through their preferred brokerage. They outsource trading to focus on investment strategy. Prime brokerages then give up deals for their fund or institutional investor clients.
What is the meaning of trading away?
Trading away means using another broker or dealer.1TradingAway lets traders trade with numerous brokers from one account. This can help when one broker, generally the primary broker, cannot access specific markets or products.
A Master Give-Up Agreement?
Two parties sign a master give-up agreement to permit transactions between clients and dealer banks. The agreement will include a compensation arrangement for losses if the primary broker rejects the give-up transaction.
What’s the AGU Agreement?
An AGU agreement, or “Automatic Give-Up,” locks in a transaction in the logging system. Similar to give-up agreements, parties must record these agreements with FINRA.
How do give-up trades work?
Give-up transactions operate when one party cannot place the deal and entrusts it to a third party. Mary may exchange ABC stock for John if John cannot reach Andy, who owns it, and send it to John when John pays. There can be four parties if Andy can’t deal with them individually. Nowadays, it’s electronic.
Bottom Line
Give-up deals were more prevalent when brokers traded physically. Nowadays, computers trade the fastest and cheapest. Sometimes, “giving up” a transaction is necessary, but less often.
Conclusion
- A give-up agreement involves one executing broker trading a commodity or asset for another broker.
- A “give-up” occurs when the broker performing the trade relinquishes record-keeping credit.
- Present-day financial markets seldom give up, although it was typical before electronic trading.
- A give-in is accepting a give-up exchange.
- Industry standards do not specify give-up trade compensation and frequently include broker agreements.
