Give Up

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Give-Up Trades: Definition, Mechanics, and Examples

A give-up trade is an arrangement where one broker executes a transaction on behalf of another broker and then “gives up” or credits the trade to the client’s broker in the official record. This practice helped ensure timely execution when the client’s broker could not act directly, especially during the era of floor trading. With modern electronic trading, give-up trades occur less often and are mostly handled through automated systems.

Key points

  • The executing broker places the trade but records it as if the client’s broker executed it.
  • Give-up trades typically require prearranged agreements covering execution procedures and compensation.
  • Acceptance of a give-up is sometimes called a give-in, though that term is less common.
  • Electronic execution and automated give-up systems have reduced the need for physical broker proxies.

How give-up trades work (mechanics)

  • Prearranged agreement: Broker relationships and payment terms (retainer, per-trade commission, or spread-sharing) are agreed in advance.
  • Execution: An executing broker (proxy) places the order in the market on behalf of the client’s broker.
  • Recordkeeping: The trade is logged under the client’s broker for reporting and settlement; the executing broker may not appear on the trade ticket as the primary broker.
  • Compensation: The executing broker is compensated according to the agreement—either directly by the client’s broker or indirectly through the client’s commissions.

Main parties

  • Party A — Executing broker: physically or electronically places the trade.
  • Party B — Client’s broker (credited): retains client relationship and receives trade credit.
  • Party C — Counterparty broker: stands on the opposite side of the trade.
  • If both original brokers cannot act, additional executing brokers can be used, producing give-ups on both sides.

Example

Broker B receives an order from a client to buy 100 shares of XYZ on the exchange but cannot access the trading floor. Broker B asks Floor Broker A to execute the order. Floor Broker A buys the stock and then records the transaction so that Broker B receives the trade credit; Broker A is compensated according to their give-up agreement.

Variants and related terms

  • Give-in: The acceptance of a give-up; a less-used term describing the credited status after execution.
  • Trading away: Executing trades through a different broker or dealer—useful when the primary broker lacks market access or specific instruments.
  • Master Give-Up Agreement: A standing agreement between counterparties that authorizes give-up transactions and defines compensation and responsibilities.
  • Automatic Give-Up (AGU): A system-based arrangement that automatically associates executed trades with the credited broker in the trade-reporting system; such arrangements typically must be reported to relevant regulators.

Prime brokerage context

Prime brokers provide bundled services for institutional clients and often handle execution and settlement on behalf of hedge funds and other large clients. Prime brokers commonly use give-up arrangements to assign trade credit and manage execution across multiple dealer banks or executing brokers.

Practical considerations

  • Historical vs. modern use: Physical give-up arrangements were more common before electronic markets; today most give-ups are handled electronically.
  • Compensation and risk: Clear agreements are essential to determine fees, settlement responsibilities, and what happens if a give-up is rejected.
  • Reporting and compliance: Automated give-up systems and master agreements help ensure accurate reporting and regulatory compliance.

Bottom line

Give-up trades allow a different broker to execute a trade while crediting the transaction to the client’s broker. While once central to floor-based trading, the practice has evolved into largely electronic processes governed by master agreements and automated systems. Clear prearranged terms for execution, compensation, and reporting remain essential whenever give-up arrangements are used.