|
|
(15 intermediate revisions by the same user not shown) |
Line 1: |
Line 1: |
| '''Never''' surrender.
| | {{anat|brokerage|[[File:Rickroll.jpg|centre|thumb|500px|The original EGUS standard electronic give up was developed by the [[futures commission merchant]] Stock, Aitken & Waterman]]}} |
| | ''Never'' surrender. |
|
| |
|
| A [[give up]] is in practical theory an arrangement whereby a pending trade between a [[hedge fund]] and an [[executing broker]] - be it a [[derivative]] or for a [[cash trade]] - is “given up” by the hedge fund to its [[prime broker]], who accepts the fund's contract with the executing broker on condition that it can put on an economically identical off-setting transaction with the hedge fund. | | 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. | | 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 neither of them involve a contract which is “given up” as such. | | 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. |
| *'''ISDA Give Up''': under the [[2005 ISDA Master Give-Up Agreement]], [[derivatives]] traded under an {{isdama}} may be given up to a {{tag|Prime broker}}. Under this arrangement the hedge fund acts at all times as the [[Prime broker|prime broker’s]] [[agent]] (it may not be a client of the {{tag|executing broker}} at all) and never creates its own contract with the executing broker - it simply arranges the contract between the {{tag|executing broker}} and the prime broker. The [[PB]] then puts on a back-to-back trade with the [[HF]] under the ISDA between them. Net result: the PB intermediates between [[EB]] and [[HF]]. Calling this arrangement a “give-up” is something of a misnomer.
| | ===[[ISDA give-up]]s=== |
| *'''Equity Give Up''': Under a cash equity give-up, the hedge fund seeks a ''firm price'' indication from the {{tag|executing broker}}, but ''does not act on it'': rather, the [[hedge fund]] takes the quote and instructs its [[prime broker]] to do execute it — directing its attention to the winsome executing broker who is awaiting its call (in practice, the [[executing broker]] will “allege” the trade to the [[prime broker]], which is rather like buzzing in to answer a question on University Challenge before Bamber Gascoigne has finished asking it: “a little birdie tells me you are going to instruct me to trade on an equity to [[hedge]] a [[swap]] you’re about to put on with your client hedge fund X. Well — here it is!”). Once the [[PB]] has traded with the [[EB]], the [[PB]] creates a back-to-back transaction with its client, usually in the shape of an [[equity swap]] transacted under an {{isdama}}. This one is a misnomer too, amusingly enough<ref>when you are a [[prime brokerage]] [[mediocre lawyer|lawyer]], you have to take your yuks where you can find them</ref>, since here, also, there is never a contract that is given up. Note that in theory — even if not awfully often in practice — the prime broker can feign total ignorance and refuse to transact, thereby hanging the [[executing broker]] out to dry with any recourse against anyone for the equity trade it has executed.
| | {{isda giveup}} |
| *'''ETD Give Up''': Documented under the {{tag|FIA}} standard giveup documentation, available free to the world, [http://www.fia-tech.com/EGUS/Agreements/standard.asp here]. There is a [http://www.fia-tech.com/downloads/STDC-2008-final.pdf Customer Version] and a [http://www.fia-tech.com/downloads/STDT-2008-final-1.pdf Trade Version] of the [[Electronic Give-Up System]] ([[EGUS - CCP|EGUS]]). The {{tag|ETD}} give-up is the only one that functions as a real trade between client and [[executing broker]] and then a [[novation]] of that trade from client to [[clearing broker]], at which point a back-to-back transaction springs into life between the [[clearing broker]] and the [[client]].
| | |
| | ===[[Equity give-up]]s=== |
| | {{equity giveup}} |
| | |
| | ===ETD Give Up=== |
| | Documented under the {{tag|FIA}} standard giveup documentation, available free to the world, [http://www.fia-tech.com/EGUS/Agreements/standard.asp here]. There is a [http://www.fia-tech.com/downloads/STDC-2008-final.pdf Customer Version] and a [http://www.fia-tech.com/downloads/STDT-2008-final-1.pdf Trade Version] of the [[Electronic Give-Up System]] ([[EGUS - CCP|EGUS]]). |
| | |
| | The {{tag|ETD}} give-up is the only one that functions as a real trade between client and [[executing broker]] and then a [[novation]] of that trade from client to [[clearing broker]], at which point a back-to-back transaction springs into life between the [[clearing broker]] and the [[client]]. |
|
| |
|
| ===See Also=== | | ===See Also=== |
| *[[2005 ISDA Master Give-Up Agreement]] | | *[[2005 ISDA Master Give-Up Agreement]] |
| | *[https://www.youtube.com/watch?v=oHg5SJYRHA0 Important information about give-ups] |
| | {{ref}} |
| | {{egg}} |