Give-Up Trade: Definition, Parties, and Example

Give-Up Trade: Definition, Parties, and Example

Parties Involved in Give-Up Trade

There are three main parties involved in a give-up trade:

1. Executing Broker: This is the broker who receives the order from the executing customer and executes the trade on their behalf. They are responsible for finding the best price and executing the trade in a timely manner.
2. Executing Customer: This is the customer who initiates the trade and instructs the executing broker to execute it on their behalf. They may be an individual investor, a hedge fund, or an institutional investor.
3. Carrying Broker: This is the broker who receives the trade from the executing broker and settles it with the executing customer. They handle the administrative tasks, such as clearing and settling the trade, and may also provide additional services like custody and financing.

Example of Give-Up Trade

Let’s say an institutional investor wants to buy a large quantity of a particular stock. They contact their executing broker and provide them with the necessary details of the trade, including the desired price and quantity. The executing broker then executes the trade on a stock exchange on behalf of the institutional investor.

Once the trade is executed, the executing broker “gives up” the trade to a carrying broker. The carrying broker then takes over the trade and settles it with the institutional investor. They ensure that the trade is properly cleared, settled, and recorded in the relevant accounts.

Overall, give-up trades are a common practice in the financial market, especially in situations where a party may not have the necessary resources or expertise to execute and settle a trade on their own.

Definition of Give-Up Trade

Give-up trades are commonly used in situations where the executing broker does not have the necessary infrastructure or capabilities to settle the trade. In such cases, the executing broker will give up the trade to a carrying broker who can handle the settlement process.

The give-up trade process involves the executing broker sending the trade details to the carrying broker, who then takes over the responsibility for settling the trade. This includes tasks such as confirming the trade, clearing and settling the transaction, and ensuring all necessary documentation is in place.

It is important to note that the executing customer remains the ultimate owner of the trade, even though the executing broker and carrying broker are involved in the transaction. The executing customer retains all rights and benefits associated with the trade, such as dividends or interest payments.

Give-up trades are commonly used in various financial markets, including stocks, bonds, commodities, and derivatives. They provide a way for executing brokers to efficiently execute trades on behalf of their customers while leveraging the expertise and capabilities of carrying brokers for settlement and other post-trade activities.

In summary, a give-up trade is a transaction where an executing broker executes a trade on behalf of a customer but then gives up the trade to a carrying broker for settlement. This process allows executing brokers to leverage the capabilities of carrying brokers for efficient trade execution and settlement.

Parties Involved in Give-Up Trade

In a give-up trade, there are three main parties involved:

Party	Description
Executing Broker	The executing broker is the intermediary who executes the trade on behalf of the client. They receive the order from the client and execute it on the relevant exchange or trading platform.
Clearing Broker	The clearing broker is responsible for the clearing and settlement of the trade. They ensure that all necessary documentation and regulatory requirements are met. They also handle the transfer of funds and securities between the buyer and seller.
Client	The client is the individual or institution that initiates the trade. They provide the executing broker with the order to buy or sell a specific security.

It is important for all parties to communicate effectively and accurately throughout the give-up trade process to ensure that the trade is executed correctly and all regulatory requirements are met. Any discrepancies or errors can lead to delays or financial losses.

Example of Give-Up Trade

Let’s take a closer look at an example to better understand how a give-up trade works.

Parties Involved

1. The executing broker: This is the broker who receives the order from the client and executes the trade on their behalf.
2. The clearing broker: This is the broker who clears the trade and ensures that all necessary documentation and compliance requirements are met.
3. The introducing broker: This is the broker who introduces the client to the executing broker and facilitates the trade.

Trade Process

Here’s a step-by-step breakdown of how the give-up trade process works:

1. The client contacts the introducing broker and expresses their interest in executing a trade.
2. The introducing broker communicates the client’s order to the executing broker.
3. The executing broker executes the trade on the client’s behalf and generates a trade confirmation.
4. The executing broker sends the trade confirmation to the clearing broker.
5. The clearing broker verifies the trade details and ensures compliance with regulatory requirements.
6. The clearing broker sends the trade confirmation to the introducing broker.
7. The introducing broker reviews the trade confirmation and forwards it to the client.
8. The client reviews the trade confirmation and confirms its accuracy.
9. Once the trade confirmation is confirmed by the client, the clearing broker settles the trade and updates the necessary records.

This example illustrates the collaborative nature of give-up trades and the importance of clear communication and documentation between the parties involved. It also highlights the role of each party in the trade process and their responsibilities in ensuring a smooth and compliant transaction.

Party	Responsibilities
Executing Broker	Executing the trade on behalf of the client
Clearing Broker	Clearing the trade and ensuring compliance
Introducing Broker	Facilitating the trade and communicating with the client

Definition of Give-Up Trade

The give-up trade is commonly used in situations where the giving-up broker does not have direct access to the market or lacks the necessary resources to execute the trade themselves. It allows brokers to collaborate and leverage each other’s strengths to execute trades efficiently.

Parties Involved in Give-Up Trade

The give-up trade involves three main parties:

1. Giving-Up Broker: This is the broker who initiates the trade but does not have the means to execute it directly. They rely on the executing broker to carry out the trade on their behalf.
2. Executing Broker: This is the broker who executes the trade on behalf of the giving-up broker. They have the necessary resources, access to the market, and expertise to execute the trade efficiently.
3. Client: The client is the individual or entity on whose behalf the trade is being executed. They may be a customer of the giving-up broker or the executing broker.

These three parties work together to ensure the smooth execution and settlement of the give-up trade.

Example of Give-Up Trade

To better understand how a give-up trade works, let’s consider an example:

Broker A provides the necessary details of the trade to Broker B, including the stock symbol, quantity, and price. Broker B then executes the trade on behalf of Broker A, using their own resources and market access. Once the trade is executed, Broker B ensures that it is settled, and any profits or losses are attributed to Broker A.