The Need For Multi-Prime Brokers

As a leading European bank and a prominent global institution, https://www.xcritical.com/ BNP Paribas’ strong credit ratings provide our clients with confidence in all market conditions. The FXPB platform has long-standing robust risk management capabilities with multiple margin methodologies to appropriately support different trading strategies, including cross-margining capabilities. Our platform provides a full set of tools that allow clients to work with multiple asset classes and currencies in a single consolidated account. Our clearing professionals complement this with a range of services, including consulting, risk management and securities lending. Since they are more active with trading and tend to generate more commissions and fees, prime brokers also prefer these active participants. Prime brokers have a critical part in providing introduction to new capital for hedge funds.

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There are different types of brokerage services that you can operate, each with distinct features and objectives. With a deep understanding of the platform costs and operations requirements, BNP Paribas has a stable, sustainable and growing FXPB franchise. We help drive industry conversations across the FXPB ecosystem, particularly on systemic topics such as the ‘over-allocation’ of credit lines and ‘dry powder’ risk. Fund managers are casting their nets more widely than ever before when looking for a primary or secondary prime broker prime broker. Here are my top five tips for what to consider when choosing a prime broker.

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‘DataDirect’ provides a full suite of end-of-day and intraday (real time) reports for positions, credit, trades and margin. ‘Infinity’ is BNP Paribas’ front-to-back system which includes end-to-end matching engine, trade booking, real-time risk management, with a full reporting suite which is proprietarily developed in-house by BNP Paribas. It provides enhanced flexibility compared with a 3rd party vendor approach, enabling special integration and bespoke functionality for clients. This kind of service is of interest to funds like stat arb players, with a high volume of transactions being carried out on a daily basis, which want to factor in the cost of borrowing so that they know a trade will be profitable. A typical program would offer major European index stocks at 40bps, while the bank would be paying 10bps to obtain them.

A prime brokerage platform designed for your success

We tap unique sources of supply and apply a risk-based model to allow for better pricing and stability, while providing access to traditional multi trillion-dollar pools of lending assets. A custodian refers to a financial institution that holds securities of its clients for safekeeping. A prime brokerage agreement is an agreement between a prime broker and its client that stipulates all of the services that the prime broker will be contracted for. It will also lay out all the terms, including fees, minimum account requirements, minimum transaction levels, and any other details needed between the two entities.

Prime Brokerage Clearance Services Agreement (Form – January 12, 2012

For starters, there is already a firmly entrenched view within the hedge fund community that if a firm is using a prime broker for the bulk, if not all its trades, it remains a very complicated process to appoint another. This is a myth that is encouraged by many prime brokers, who might argue that this would make stock loan more complicated, or that the fund would lose the benefits of cross-margining. IBKR simplifies trade processing for prime brokerage clients by providing seamless clearing and settlement services, ensuring timely and accurate execution across diverse global markets and instruments. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

• The teams provide a rage of efficient post-trade solutions that enables clients to automate allocation, manage positions and process reporting.
• It creates jobs for thousands of people and makes a significant contribution to the economy.
• Fund managers often feel “locked up” in their single-prime technology platform.
• 26 Degrees is focused on partnering with active family offices and emerging hedge funds.
• Save time and resources with our single-point-of-contact service model that acts as a valuable extension of your team.
• Combining business consulting and capital introductions, Jefferies Capital Intelligence leverages proprietary data and information flow tools to provide a more targeted and customized experience for clients.
• Primer brokerages offer services outside that of executing brokers at a cost.

We help clients alleviate impacts and challenges of regulatory developments on DEC, and provide clients with access to leading markets through over 70 exchanges and major Central Counterparty Clearing Houses (CCPs). The teams provide a rage of efficient post-trade solutions that enables clients to automate allocation, manage positions and process reporting. We have a comprehensive in-house algorithm offering, through FinTech partnerships and a global voice desk, and strong commitment in our digital platforms to deliver best-in-class service to clients. As the hedge fund market has matured, it has attracted institutional investors and an increased need for regulation.

References to securities trading and prime services are made on behalf of the BD Division of SFI. References to exchange-traded futures and options are made on behalf of the FCM Division of SFI. You can learn more about the background of StoneX Financial Inc. on BrokerCheck.

The challenge with developing streamlined technology to address a manager’s demands is the potential high costs it could incur. Accordingly, one would expect the phenomenon of moving from a single prime brokerage relationship to a multiple one to be particularly evident in this last group. One can expect to see the increase in prime brokerage relationships from one to two or sometimes three as the manager’s capital approaches $1 billion.

The use swaps to benefit when the underlying asset prices rise is a double edged sword when the assets collapse in value as in the case of Archegos. Additional services include risk analysis and management, introduction to capital, access to research, back office support, subleasing office space and consulting services. Most prime brokers seek to service hedge funds, institutions like pension funds, and commercial banks.

Jefferies Client Service team has over 20 experienced client service representatives in our New York, London and Hong Kong offices. The use of the firm’s platforms and technology may be affected by factors such as trading volume, market conditions, system performance and/or other factors. Pershing actively monitors the technology environment and endeavors to resolve issues promptly through various means.

High-touch and electronic equities and options trading capabilities with leading industry liquidity providers. The platform allows for various structures and can be flexible according to clients’ preferences. We tailor reset schedules, timing and frequency of settlements, contract maturity, cash flow exchanges and unwind methodology, among other features. Our capabilities combine professional service with a back office platform that allows us to clear 3 million trades per day. Our Clearing expertise helps clients execute and settle transactions on over 97% of the world’s equities and derivatives exchanges.

Hedge funds also benefit from the core service offerings on up to the more concierge style additional services that are provided to the larger clients. For hedge funds or other institutional clients to get the kind of services that make having a prime brokerage account worthwhile (most notably discounted fees for trading), an account size of $50 million in equity is a likely starting point. While a hedge fund traditionally holds accounts at different brokerage firms, it commonly instructs these executing brokers to clear all trades through its designated prime broker.

Featuring multiple routes to market and exceptional service, our financing solutions support a wide range of strategies leveraging the BNY enterprise. It is a relatively small hedge fund personnel-wise and lacks the expertise to best allocate and invest the funds. Netting is a process where multiple positions are taken on by an investment bank or financial institution and can be aggregated into one net obligation position.

Short sale locates, access to dark pools and clearing are all part of the core business of prime brokers. Leverage is one of the primary benefits of using a prime broker since they have custody of its clients assets, the prime broker is capable of using those assets to lever more buying power to its clients. The ideal prime brokerage client will make generous use of its available leverage while having plenty of margin available so as not to trigger any margin calls, force liquidation or defaults. As a leading European bank with a prominent global presence, BNP Paribas is one of the few banks globally with a comprehensive suite of investor services. Our multi-asset Prime Services offering provides clients with access to one of the broadest product capabilities across prime brokerage, clearing, and FX prime brokerage.

PBs offer a broader range of financial services that range from settling market positions to asset management, while executing brokers specialise in processing market orders. Most of the larger prime brokers are focused on servicing large clients – the $1 billion+ hedge funds (which, according to TASS and Bernstein constitute approximately 2% of hedge funds, with 23% of the total AUM2). For the smaller hedge funds, specialized boutique prime brokers are scrambling to take their business.

With over 30 years of experience, Goldman Sachs has an extensive global footprint in the futures market covering 55 major derivatives exchanges worldwide. Our FX and Precious Metals offering ensures our clients have access to world-class liquidity from more than twenty bank, non-bank and ECN liquidity sources. IBKR BestXTM is a powerful suite of advanced trading technologies designed to help clients achieve best execution and maximize price improvement while minimizing market impact. Manage taxes and corporate actions, learn about T+0 settlement and trade allocations, and read about additional tools and services available to clients. Our market expertise, advanced platforms, global reach, culture of full transparency and commitment to our clients’ success all set us apart in the financial marketplace. Investment advisory services, if offered, may be provided by BNY Mellon Advisors, Inc., an investment adviser registered in the United States under the Investment Advisers Act of 1940 or one or more affiliates of BNY.