Give up

Never surrender.

A give up is in practical theory an arrangement whereby a pending trade between a hedge fund and an executing broker is "given up" by the hedge fund to its prime broker, who then turns around and executes an (economically) identical transaction with the hedge fund.

It sounds, you might think, like some kind of novation. But oh, no. That would be far too sensible.

There are two normal ways of giving up, and ironically neither of them involve any contract which is given up.

• ISDA Give Up: under the 2005 ISDA Master Give-Up Agreement, derivatives traded under an ISDA Master Agreement may be given up to a Prime Broker. Under this arrangement the hedge fund acts at all times as the prime broker's agent (it often won't be a client of the executing broker at all) and never creates its own contract with the executuing broker. Thus there's only ever one contract between Dealer and Prime Broker - so the document is a misnomer of sorts.
• Equity Give Up: Under a cash equity give-up process, the prime broker's client seeks a price indication from the executing broker, but never transacts any trade at all, but rather takes the quote and instructs its prime broker to do so, and following execution the PB creates a back-to-back transaction with its client. This one is a misnomer to, amusingly enough*, since here, also, there is never a contract that is given up.

See Also

• 2005 ISDA Master Give-Up Agreement