Give up
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Brokerage Anatomy™
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Never surrender. A give up is, in practical theory, an arrangement whereby a hedge fund “gives up” pending transaction — be it a derivative or a cash trade — it has executed (or, cough, unsubtly hinted it is “highly interested” in executing) to its prime broker, who accepts the hedge fund’s contract with the executing broker on condition that it puts on an economically identical off-setting 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 three normal ways of giving up, and ironically none of them involve a contract which is “given up” as such. To make matters worse, the three methods are profoundly different in every respect.
We discuss them in detail in the premium content section. For now, here is a metaphorical explanation of a give-up by reference to the supermarket scene in Muswell Hill:
Give-ups through the prism of North London supermarkets
In Muswell Hill, there is a Sainsbury’s, a Marks & Spencer, a Waitrose, a good local greengrocer and recently — hooray! — an Aldi.
Being perennially tight and dissonantly fussy, JC likes to shop for different things at all of them. But it is a pain lugging his blue two-wheeler shopping trolley round this idyllic Harringay idyll for half the day. Wouldn’t it be great if I could get those best prices from around the village, all conveniently packaged and housed in one place?
This is what a give-up solves: you could call each store, get a price, give it an order and instruct it to send the order to your favourite supermarket, who would arrange payment delivery of the job lot to you — that would be like a give-up. You just settle up your bill with one place. It sorts everything out with the other markets.
Give-ups function differently
The problem is, the way one goes about organising that differs between markets. It is like you would need to do it one way for veggies, another way for drinks, another way for cleaning products.
So in FX, for example, you log into your broker’s system and directly transact, as if you were the broker yourself, with the dealer you want to use.
In equity derivatives, you call up the dealer, ask it how much it would offer for the stock, give that price to your broker and tell your broker to trade with the dealer.
In fixed income PB, what about that?
Why ChatGPT won’t take your job just yet
So this is why I think the game is not quite up just yet for the meatware: I tried asking Claude, Co-Pilot, DeepSeek and ChatGPT. How does fixed income PB work?
None had a clue.
Oh, they all guessed easily enough: they all gave apparently plausible answers. But none of them was right. Because the internet is bereft of information about give-ups. No one — okay, no one except JC — no one blogs about give-up techniques.
There are no flame-wars about give-ups on Twitter. Law firms don’t write think pieces about give-ups, because law firms generally don’t know about give-ups: How would they? This is working operational knowledge. It is buried in systems and brains in operations departments in banks. This stuff doesn’t get onto the internet. And nor can you work it out from first principles.
The concept doesn’t really make a lot of sense. Many give-ups don’t actually involve anyone giving anything up. The market is weirder and more human than can rationally be explained.
And — to keep that sacred knowledge from the brow of the machines — it is in the premium content section.
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Premium content
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