Step-Out Trades vs. Trades Away: What Each Term Means
Updated October 2026. First published April 2024.
A trade away and a step-out both involve two broker-dealers and one client, which is why the terms get mixed up. They describe different things. A trade away is about where the order was executed: at a broker other than the one that holds the client's account. A step-out is about moving a trade that has already been executed: the executing broker transfers all or part of the position to another broker-dealer, which then settles it with the client.
| Trade away | Step-out | |
|---|---|---|
| What it describes | Executing at a broker other than the account's custodian, prime broker, or wrap sponsor | Transferring an executed position from one broker-dealer to another |
| Who settles with the client | The firm that holds the account, through DVP or prime brokerage | The receiving firm (the step-in broker) |
| Trade reporting | The executing broker reports the trade as usual | A clearing-only, non-tape step-out report, matched by the receiving firm's step-in |
| Typical reasons | Best execution, a block desk, a specific market or product | Commission sharing, directed brokerage, an account held at the receiving firm |
| Paperwork that matters | Prime brokerage agreements, settlement instructions, and for cash accounts the Regulation T basis for DVP settlement | The client's instruction naming the step-in broker, and both firms' reports |
Trades Away
"Trading away" means executing an order somewhere other than the firm that carries the account. The trade still settles into that account. Three settings use the term, and each has its own rules.
Prime brokerage. A hedge fund keeps its account at a prime broker and executes through many executing brokers. Each of those trades is a trade away, often called a done-away trade. The arrangement rests on the SEC staff's 1994 prime brokerage no-action letter and the SIA Form 150 agreement. The executing broker confirms the trade to the customer and notifies the prime broker, and the prime broker affirms or disaffirms it. If the prime broker disaffirms, the trade stays with the executing broker. That's why the executing broker needs the documents in order before it trades; what a missing F1SA costs the executing broker walks through what happens when they aren't.
Institutional DVP accounts. An institution with assets at a custodian bank buys through an executing broker and settles delivery versus payment at the custodian. If the executing broker carries this as a cash account, delivering the shares before the customer has paid in full needs a basis under Regulation T. The written statement firms rely on is the Letter of Free Funds.
Wrap fee programs. A wrap fee usually covers execution by the sponsor's broker-dealer. When the adviser trades away from that broker, the client can pay commissions or spreads on top of the wrap fee. In a July 2021 risk alert covering more than 100 examinations, SEC staff named the failure to monitor trading away, and its costs, as the most common duty-of-care problem they found.
Step-Out Trades
A step-out moves a position that one firm executed to another firm, without a new trade. FINRA's July 2019 Trade Reporting Notice describes it this way: no shares or money change hands between the client and the market, and beneficial ownership doesn't change. The transferring firm submits a clearing-only report with a step-out indicator, which isn't disseminated to the tape. The receiving firm submits the matching step-in. FINRA's facilities match a step-out to a step-in, never two of the same kind.
The common reasons are commercial. A client may want commission credit at a firm that provides research, or have its account at a broker-dealer that didn't execute the order. A block executed by one desk can be stepped out in pieces to several firms.
A step-out isn't a way to report a trade late. FINRA's rules don't allow a step-out for a trade that was never reported, with a narrow exception for the offsetting leg of a riskless principal trade.
Terms That Get Confused With These
- Give-up. In futures and listed options, the executing broker "gives up" the trade to the customer's clearing firm, which has to accept it. Futures firms document this with the FIA and ISDA give-up agreement. In listed options, OCC's Clearing Member Trade Assignment (CMTA) arrangement lets one clearing member send trades to another for clearance. Equity desks sometimes say "give-up" when they mean a step-out.
- Out-trade. A trade the two sides' records disagree on (price, quantity, side, or counterparty), so it can't clear until someone resolves the difference. It's an error to fix, not a type of trade.
- Selling away. Nothing to do with settlement. It's a registered representative's private securities transaction outside the firm without the notice and approval FINRA Rule 3280 requires. The SEC approved FINRA Rule 3290 in September 2026 to replace Rules 3270 and 3280. As of October 2026, FINRA hasn't announced the effective date, so Rule 3280 still applies.
Where Mixing Them Up Causes Problems
- Trade reporting. A step-out submitted as a tape report shows volume that never traded, and a missing step-in leaves the step-out unmatched. Either one is an error to correct with FINRA.
- Affirmation. A trade away that the custodian or prime broker doesn't expect gets DK'd. Under T+1, Rule 15c6-2 expects allocation, confirmation, and affirmation on trade date, so there's little time to sort it out.
- Regulation T. A trade away that settles DVP from a cash account needs the Regulation T basis on file. Without it, the executing broker has no documented basis for delivering before payment.
- Adviser disclosure. In a wrap program, trade-away costs belong in the disclosure and in the adviser's review of whether the wrap account still fits the client.
For the prime brokerage side, Loffa's Prime Broker Integrated Network (PBIN) keeps the SIA-150 and F1SA agreements behind done-away trades, and Freefunds Verified Direct (FVD) handles Letters of Free Funds for DVP trades away.