What is a Give‑Up?
A give‑up (or giveup) is a trade execution arrangement in which one broker (the executing broker) carries out an order on an exchange or market but “gives up” the trade credit in the official books to another broker (the client’s or clearing broker). The trade is recorded in the market and back‑office records as if the client’s broker placed it, even though a different broker actually executed it. Give‑ups were common in the era of floor trading and remain relevant in some prime‑brokerage and cross‑border workflows, but they are far less frequent now because of electronic trading and integrated clearing systems.
Key takeaways
– A give‑up separates execution from trade credit/recording: the executing broker performs the trade; the client’s broker receives the trade record.
– Typical parties: executing broker (Party A), client’s/clearing broker (Party B), and the counter‑party broker (Party C). A fourth executing broker can be involved if both original sides use proxies.
– Give‑ups require prearranged agreements that set compensation, responsibilities, and acceptance rules — often via a Master Give‑Up Agreement or an Automatic Give‑Up (AGU) arrangement.
– Trade reporting and regulatory compliance remain essential; in the U.S., FINRA and clearing firms have rules and reporting procedures for give‑up activity.
– Give‑ups are much less common today because electronic systems let brokers execute and clear trades directly.
How give‑up trades arise (mechanics)
1. Need for proxy execution: Broker B (the client’s broker or clearing/prime broker) receives an order but cannot place it directly on the market—typical historical reasons were absence from the trading floor, lack of market access, or speed/coverage constraints.
2. Execution by a third party: Broker B asks Floor/Executing Broker A to carry out the order on its behalf. Broker A executes the trade against Broker C (opposite side).
3. Recording the trade: Even though Broker A executed the trade, the trade is recorded and allocated to Broker B and its client in the trade ledger and clearing instructions. Broker A “gives up” the trade to Broker B for credit and recordkeeping.
4. Compensation: Broker A is compensated according to a prior agreement (retainer, per‑trade fee, or portion of commissions). The fee structure must be prearranged and documented.
Differentiating give‑up and give‑in
– Give‑up: The executing broker executes a trade but records it in the books as if another broker placed the order.
– Give‑in (acceptance of a give‑up): Sometimes used to describe the act of accepting a give‑up trade. “Give‑in” is less commonly used in practice, but can denote acknowledgement/acceptance by the client’s/clearing broker.
Key players in a give‑up trade
– Executing broker (Party A): Performs the market transaction and physically or electronically executes the order.
– Client’s/clearing broker (Party B): Receives trade credit and is responsible for client relationship, clearing, custody, and reporting.
– Opposite side broker (Party C): Counterparty to the trade on the market.
– Note: If both buying and selling brokers use proxies, there can be four executing parties; each side may use a different executing broker.
Illustrative example
– Broker B (upstairs broker) gets a buy order from a client for 100 shares of XYZ on the NYSE but cannot reach the trading floor. Broker B requests Floor Broker A to execute the order.
– Floor Broker A buys 100 shares on the NYSE from Broker C. After execution, Floor Broker A gives up the trade to Broker B: official records and clearing instructions credit Broker B and its client with the purchase. Broker A is paid according to their give‑up compensation agreement with Broker B.
Give‑Up in Prime Brokerage
Prime brokerages provide bundled services (execution, clearing, custody, financing) to institutional clients and hedge funds. Prime brokers frequently coordinate give‑ups:
– A client may execute through various executing brokers (to access liquidity, algos, or specific markets) but wants the trade credited to its prime broker for margin, custody, and reporting.
– The prime broker’s relationship with multiple executing dealers relies on give‑up or AGU arrangements so that the client’s positions and exposures are centralized at the prime.
Trading away — what it means
“Trading away” generally refers to executing trades through brokers other than a trader’s main or preferred broker. Benefits:
– Access to specific markets, liquidity, or execution tools (algorithms, floor presence).
– Consolidation of positions under one clearing/prime account while using multiple executing brokers.
Practical consequence: firms must track give‑ups and ensure fees, best execution policies, and reporting are followed.
Master Give‑Up Agreement — what it covers
A Master Give‑Up Agreement between two brokers (or between a prime broker and executing dealers) typically:
– Authorizes which dealers/brokers may execute and give up trades.
– Defines the mechanics and timing for give‑up reporting and trade allocation.
– Specifies compensation and fee sharing (retainer, per‑trade fees, commission splits).
– Allocates settlement, clearing, and failure responsibilities (who bears cost if a give‑up is not accepted).
– Sets acceptance criteria and remedies for rejected give‑ups.
– Includes confidentiality, recordkeeping, audit rights, and termination clauses.
AGU agreement (Automatic Give‑Up)
Automatic Give‑Up (AGU) automates the give‑up process in the trade reporting/clearing system:
– The executing broker’s system automatically tags the trade so that it is routed and recorded under the client’s clearing/prime broker (Party B).
– AGU reduces manual intervention and operational error risks but requires robust system integration and preapproved relationships.
– AGU and give‑up arrangements are subject to regulatory reporting requirements (e.g., FINRA trade reporting rules in the U.S.).
How give‑up trades work — step‑by‑step (practical workflow)
For brokers or firms implementing give‑up workflows, here are practical steps:
Operational steps to execute a single give‑up trade
1. Pre‑trade setup:
– Ensure a preexisting Master Give‑Up or AGU agreement is in place with defined compensation and acceptance rules.
– Confirm counterparty and executing dealer are authorized for give‑up with the clearing/prime broker.
2. Order receipt:
– Broker B receives client order and decides to use Executing Broker A (due to speed, access, or other reasons).
3. Execution:
– Broker A executes the trade on the market versus Broker C. Execution details (price, size, time) are captured.
4. Trade tagging:
– The trade is tagged as a give‑up for Broker B in the execution report (manual entry or AGU flag).
5. Confirmation and acceptance:
– Broker A sends execution report to Broker B; Broker B (or its clearing system) acknowledges and accepts the give‑up per the agreement.
6. Clearing and settlement:
– Trade is cleared and settled under Broker B’s books; allocations are sent to the clearinghouse and custodian.
7. Compensation settlement:
– Broker A receives compensation as specified (per‑trade fee, retainer offset, or commission split).
8. Recordkeeping and reporting:
– Both brokers retain records and file required trade reports with regulators (e.g., FINRA in the U.S.) and the clearinghouse.
Operational and compliance steps to set up give‑up arrangements
1. Legal: Negotiate and sign a Master Give‑Up Agreement covering authority, fee structures, acceptance rules, liability, termination, and dispute resolution.
2. Operational: Test system integration for trade tagging, allocation messaging (FIX/other protocols), and settlement flows. Implement exceptions and recon procedures.
3. Regulatory: Register/report according to local rules; prepare audit trails and policies for trade surveillance and best execution.
4. Credit/counterparty: Establish credit limits, collateral rules, and contingency plans for failed give‑ups or rejected trades.
5. Training: Train sales/traders/operations staff on give‑up mechanics, acceptance cutoffs, and exception handling.
6. Monitoring: Reconcile trades daily, monitor fees and retainer usage, and maintain governance over authorized executing brokers.
Benefits and drawbacks
Benefits
– Access: Allows the use of executing brokers with particular market access or floor presence.
– Consolidation: Centralizes client positions at the prime/clearing broker for margin, custody, and reporting.
– Flexibility: Enables clients to access multiple execution venues while maintaining one clearing relationship.
Drawbacks and risks
– Operational complexity: Additional reconciliation, exceptions, and system integration required.
– Counterparty risk: If a give‑up is rejected or an executing broker fails to deliver, settlement and credit issues arise.
– Cost allocation: Fee arrangements must be carefully designed to avoid disputes and ensure best execution transparency.
– Regulatory scrutiny: Trade reporting, allocations, and agency disclosures must comply with rules (e.g., FINRA, exchange, and clearinghouse regulations).
Regulatory and reporting considerations
– Give‑up arrangements and AGU activity are subject to trade reporting and recordkeeping rules in most jurisdictions. In the U.S., FINRA provides guidance on trade reporting and the responsibilities of members. Clearinghouses and exchanges may also have acceptance and cut‑off windows for give‑ups.
– Firms should maintain auditable records (who authorized the give‑up, execution times, compensation, acceptance) and incorporate give‑up flows into supervisory procedures and best‑execution policies.
Practical example checklist for a broker handling a give‑up order
– Confirm the executing dealer is authorized for give‑ups with your clearing/prime broker.
– Verify the Master Give‑Up/AGU terms and the compensation structure for the trade.
– Ensure the execution report includes the give‑up tag and accurate client allocation.
– Accept/deny the give‑up within the agreed acceptance window; document reasons for any rejection.
– Reconcile trade details and fees in the back office; resolve exceptions immediately.
– Archive documentation in case of audits or regulatory inquiry.
When is give‑up still used today?
– Prime brokerage workflows for hedge funds and institutional clients that want centralized clearing while sourcing execution from multiple dealers.
– Cross‑border or specialized markets where a direct clearing relationship isn’t available for the executing broker.
– Some fixed‑income, FX, or over‑the‑counter (OTC) markets where tailored give‑up and settlement arrangements remain operationally useful.
The bottom line
A give‑up trade separates execution from trade credit: an executing broker carries out the market transaction but gives the trade credit to a client’s or clearing broker. While historically common during floor trading, give‑ups are less frequent today because electronic trading and integrated clearing have reduced the need for proxy execution. However, give‑ups and AGU arrangements remain important in prime brokerage, multi‑dealer execution strategies, and certain cross‑market workflows. Firms using give‑ups must have robust legal agreements, operational processes, and regulatory compliance to manage the added complexity and risk.
Sources and further reading
– Investopedia. “Give‑Up.” https://www.investopedia.com/terms/g/giveup.asp
– U.S. Securities and Exchange Commission. “FX Prime Brokerage Agreement.” (SEC materials on prime brokerage agreements and disclosures)
– Financial Markets Lawyers Group. “FX Master Give‑Up Agreement.” (guidance on contractual terms used in master give‑up arrangements)
– Financial Industry Regulatory Authority (FINRA). “Trade Reporting Frequently Asked Questions.” https://www.finra.org/rules-guidance/faq/trade-reporting-frequently-asked-questions
If you’d like, I can:
– Draft a sample Master Give‑Up Agreement checklist (key clauses).
– Provide an operations flow diagram or sample FIX message fields for tagging a give‑up/AGU.
– Summarize regulatory requirements for a specific jurisdiction (e.g., U.S., U.K., EU).