Template:FI giveup capsule

This (I think) would be the classic bond TRS give up flow:

1. HF places order for a TRS with its EB (i.e., order for swap, not underlier, as in Equity PB) directing it to be given up to PB 2. EB executes a TRS with the HF as follows:
   1. EB buys bond as a hedge in the market at best execution price and
   2. EB fills HF’s TRS order with a swap struck at the bond price + commission (P)
2. Per HF’s instructions EB alleges the TRS and the bond hedge to PB at P.
3. If within lines, limits etc., PB:
   1. Accepts the swap (by novation)
   2. Accepts the bond hedge (as a DVP trade with EB, against payment of P), funded from PB’s treasury.
   3. If not within the lines, PB could DK the swap and hedge, but more likely would just accept them, make the EB good on its two trades, and then immediately unwind its swap with HF and sell the bond, passing on any MTM loss or gain to HF.
4. EB is now out of the trade.
5. PB now repos the bond hedge out to the repo market, raising cash against the asset, and returns cash to PB’s treasury.