What is a Giveup?

aliesneo

I tried finding an explanation of this type of trade on google a few times, but with no luck. Could someone explain what exactly a Give Up is and why its done?

tnx

aliesneo

anyone?

copacetic

not sure it's done on purpose? my understanding of a give up is when you sell too late and the stock has given up some of it's gains already (i.e you are selling on the way down)


there are some other definitions here:
http://en.mimi.hu/stockmarket/give_up.html

aliesneo

thanks Copa but im thinking that maybe something different??

From what I know of giveups, is that an institutional client for example, may buy some stock through one of their many brokers, but instead of taking receipt of the stock, will 'giveup' the trade to another broker.. So the actual settlement, would take place between the 2 brokers. The client who originally purchased the stock, wouldnt have an involvement at all..
So what I dont understand is, whats the point in the client doing the trade in the first place...

copacetic

well that would seem to match up with some of the definitions on the link above. I'd imagine (without any real knowledge) that it would have to be for tax or discolosure reasons?

bosra

Give ups are common with institutional trading.. You have 3 parties..The executing broker...the client and the prime broker... Lets say goldmans are the executing broker.. Hedge fund A is the client..and Deutsche Bank is the prime broker....
The hedge fund goes to Goldmans to execute a trade or maybe a list of trades..Then deutsche bank steps in..takes the trade...and does all the settlement side of things with Goldmans..their two back office sort out all the trades and ensure they settle..Then finally Hedge fund A settles with their prime broker Deutsche bank..So the reason for the giveup is to lessen the burden on the hedge fund with administrative duties..Their prime broker sorts that side of stuff

aliesneo

thanks for your input Bosra but I'm still a little confused because in any regular institutional trade, there are 2 parties involved in settlement.
The broker buying the shs from the market, and the broker delivering the shs to the clients custodial account
In the case above, Goldmans delivering the shs to the clients custodial account which would be provided by Deutsche (the prime broker)
i dont see how what you mentioned above, is diffferent from the regular trade flow...????

Thanks.

bosra

Sorry, I should have said the following in the last post..Deutsche Bank (DB) place the trade with the executing broker (goldman) on behalf of the client (hedge fund). I believe the trade gets reported as if DB executed it. When it comes to settling the trade, Goldmans back office will advise the broker delivering the shares to bypass them and settle the trade with DB instead..so it is now the case that goldman 'give up' the trade to DB...Then DB settle the trade with the client (hedge fund) ..