What is a Give-Up?
A Give-Up in the context of securities or commodities trading is a process where an executing broker goes out there, makes the flashy trade, and then gives credit to another broker on paper for that snazzy transaction. It’s like trading high fives at the brokers’ party but without getting any of the glory on the scoreboard!
Traditionally, a “give up” agreement would involve the executing broker executing a trade on behalf of another broker. Much like sharing dessert—everyone gets some, but only one person takes the calories home! 🥧
Give-Up Procedure vs. Similar Concepts
| Procedure | Give-Up | Agency Trading |
|---|---|---|
| Definition | Broker executes a trade for another broker | Broker executes trades on behalf of clients |
| Credit | “Gives up” credit for transaction | Retains credit for the transaction |
| Industry | More prevalent before electronic trading | Widely used in both manual and electronic trading |
| Agreement Structure | Often informal agreements between brokers | Formal agent-client relationships |
Examples
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Example of a Give-Up Trade: Broker A wants to execute a trade but doesn’t have access to the trading platform. So, Broker A tells Broker B, “Hey, could you trade this security for me?” Broker B executes it and give ups the credit—like giving away your last slice of pizza!
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Example of Agency Trading: Broker C is acting on behalf of a hedge fund to buy a large volume of stocks. Broker C retains the credit and works with the hedge fund’s preferences throughout the trading process.
Related Terms
- Executing Broker - A broker who executes trades on behalf of another broker.
- Give-In - Acceptance of the give-up trade; sometimes akin to saying, “Fine, I’ll let you have this one!” 🤷♂️
- Prearranged Agreement - An informal structure where compensation for give-up trades is agreed upon beforehand (never talk about it outside the family, OK?).
Visual Representation
graph TD;
A[Give-Up Trade] -->|Executed| B[Executing Broker];
B -->|Credits| C[Another Broker];
C -->|Receives credit| D[Trade Compliance];
C -->|May involve| E[Prearranged Agreement];
Humor and Insights
- “In the world of give-ups, the only thing harder than executing a trade is convincing your spouse you need one more pair of shoes!” 🥿
- Did you know give-up agreements flourished like daisies in spring before the dawn of electronic trading? Now they sometimes just gather dust in the back room of brokerages.
- Historical Tidbit: Give-ups were the go-to tool in the binder of old-timey brokers looking to play musical chairs in the trading arena!
Frequently Asked Questions
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What is the main purpose of give-up trades?
- They allow brokers to trade for their clients while sharing credit and responsibilities in a less formal manner.
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Are give-ups still common in modern trading?
- Not really! In the age of electronic trading, it’s about as common as finding a typewriter in an office today.
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How is compensation determined in give-up agreements?
- Often through prearranged agreements exchanged like covert notes over a water cooler—not a clear-cut industry standard!
References and Further Resources
- Investopedia: Give-Up Agreement
- “Market Wizards: Interviews With Top Traders” by Jack D. Schwager - Gain insights from some of the brightest trading minds (no give-ups involved!).
Test Your Knowledge: Give-Up Trading Quiz
## What is the primary function of a give-up in trading?
- [x] The executing broker places a trade for another broker and gives up credit
- [ ] It allows brokers to hold onto credit from their trades
- [ ] Gives up rules and regulations for informal trading
- [ ] Enables brokers to trade in multiple markets simultaneously
> **Explanation:** A give-up involves one broker executing a trade for another and relinquishing credit for that trade.
## What is needed between brokers for a give-up trade to happen?
- [ ] A public broadcast announcement
- [ ] Approval from the stock exchange officials
- [x] A prearranged agreement
- [ ] A consensus among all trading desks globally
> **Explanation:** To facilitate a give-up trade, there is usually a prearranged agreement between brokers.
## Why are give-up trades less common now?
- [x] The rise of electronic trading
- [ ] Brokers ran out of credit
- [ ] Too many compliance issues
- [ ] They were too much fun!
> **Explanation:** With electronic trading, the need for give-ups has diminished as trades can be executed directly and quickly.
## What humorous comparison can we make for a give-up trade?
- [x] Like giving away your last slice of pizza
- [ ] Like building a robot to do your homework
- [ ] Like playing hide and seek in a very small room
- [ ] Like making friends at a haunted house
> **Explanation:** Giving credit for a trade can be likened to the generous act of letting someone else enjoy your pizza!
## What does the term "give-in" refer to?
- [x] Acceptance of a give-up trade
- [ ] A method of complaint during trading
- [ ] A bad habit of brokers
- [ ] The payment process in give-ups
> **Explanation:** "Give-in" refers to accepting the execution of a give-up trade with gracious resignation.
## In a give-up agreement, who maintains credit for the issued trade?
- [x] The broker on whose behalf the trade was executed
- [ ] The executing broker
- [ ] The clients
- [ ] The exchange
> **Explanation:** In a give-up agreement, credit goes to the broker for whom the trade was executed.
## How did give-up trades function before electronic trading?
- [ ] With only one executing broker involved
- [ ] Like a guessing game
- [x] Through traditional informal agreements
- [ ] Brokers would flip a coin
> **Explanation:** Before electronic trading, give-ups relied heavily on informal agreements between brokers, making them less formal and more friendly!
## How can give-up trades be summarized?
- [ ] As an annoying paperwork process
- [ ] A waste of brokers’ time
- [x] Broker collaboration system with credit-sharing
- [ ] A popular trading game
> **Explanation:** Give-up trades are essentially a collaborative tool for brokers to execute trades while sharing the credit, all with a wink and a nudge!
## What happens if a broker wants a give-up agreement?
- [x] They negotiate terms with the executing broker
- [ ] They write a formal proposal to the SEC
- [ ] They just do it without discussing
- [ ] They need the client's approval first
> **Explanation:** Generally, brokers negotiate terms for a give-up agreement with other brokers involved.
## Was there a time when give-ups were the hot trend?
- [x] Yes, especially before electronic trading became prevalent
- [ ] No, they were always secretive and unused
- [ ] No, they were invented post electronic trading
- [ ] Yes, but only among gossiping brokers
> **Explanation:** Give-ups were all the rage before the advent of electronic trading methods!
So remember, next time you’re trading like a boss, and see some give-ups floating around—know it’s just brokers sharing the love… with a side of pizza! 🍕
