Compensation agreements are usually put in place to manage the provisions of “trades” of “give-ups”. The execution broker (part A) may or may not receive the standard trading spread. Executing brokers are often paid by non-ground brokers either on retainer or with a pro-trade commission. This full payment to the execution broker may be part of the commission that Broker B charges his client. Calling it “give-up” is a bad name, because nothing is actually “abandoned.” In theory, even if this is not often the case in practice, the first broker may feign ignorance and refuse to negotiate with the execution broker, allowing the broker to execute to dry out any recourse against anyone because of the stock trading he has made. The FIA Law and Compliance Division regularly publishes and updates standard agreements for the future-give-up process. FIA Tech, for its part, manages Accelerate DocsTM (formerly Electronic Give-Up System (EGUS) which allows brokers, traders and customers to electronically execute standard “give-up” agreements. Companies can use standard agreements either manually in print or electronically in Accelerate DocsTM. Standard traders and customer give-up agreements are available here for download. Under the 2005 ISDA Master Give-Up Agreement, a fund can “abandon” derivatives it negotiated with a broker at its first broker. He will usually do so because he does not have an ISDA master contract with the broker.
Under this agreement, the hedge fund acts at all times as an agent of the first broker (he cannot be at all client of the execution broker) and never creates his own main contract with the execution broker, but simply arranges the contract between the execution broker and the primer. The PB then sets up a back-to-back exchange with hf as part of the ISDA-Master agreement between them. Net result: PB intermediate products between EB and HF. Calling this provision “give-up” is a kind of bad name. There are three main parties participating in a droy trade. These include the broker (part A), the client broker (part B) and the broker who takes the opposite side of the trade (part C). A standard business consists of only two parts, the purchaser seller and the seller. A task is also required for another person doing the trade (part A).