Give up: Difference between revisions

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.

*'''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.

*'''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.

===See Also===

*[[2005 ISDA Master Give-Up Agreement]]