Give-up

A give-up is the transfer of a listed derivatives trade from the broker that executed it to the broker that clears it for the client. It lets a client execute with several brokers while keeping all positions and margin with a single clearing broker.

How it works

A give-up agreement is signed between the client, the executing broker and the clearing broker. It sets the terms of the transfer, the fees and the limits. The executing broker trades on the exchange, then allocates the trade to the clearing broker through the exchange or clearing house systems. The clearing broker accepts or rejects it before a cutoff. Once accepted, the trade sits in the client’s account at the clearer and is margined there with the rest of the portfolio. The executing broker charges an execution fee, the clearer a clearing fee.

Example

Hypothetical: a fund buys 300 index futures, 100 through broker A and 200 through broker B. Both give up to clearing broker C. The fund ends with a single position of 300 contracts at C and a single margin call. With an execution fee of €0.50 per contract and a clearing fee of €0.30, the fees total 300 × €0.50 + 300 × €0.30 = €150 + €90 = €240.

On the desk

A trade that the clearer does not accept before the cutoff stays with the executing broker, with margin and position limits to match. Operations teams reconcile allocations every day, because a missed give-up shows up as an unexplained position.