Global Prime Broker Review 2024: a good Forex Broker?

These forms of investors often deal with a large amount of cash for investment but do not have the internal resources to manage the investments on their own. A prime broker is a funds main account whereas an executing broker is another broker a fund deals with that will execute orders for them and give them up to the main prime brokerage account. Prime brokers are for institutional accounts so there is not a definitive list of prime brokers.

Saxo provides multi-asset execution and integrated custody, clearing, and post-trade services to allow hedge funds to access real-time risk management, financing, and clearing across multiple asset classes. A globally-renowned financial institution with over 150 years of experience providing clients with financial services. The bank offers customized prime brokerage services to hedge funds, including daily management of accounts, technology solutions, and access to market data and research through the UBS Neo platform. The rise of alternative investments, such as hedge funds, private equity, and venture capital, has reshaped the traditional investment landscape and created new avenues for prime brokers to expand their service offerings. UBS offers a comprehensive suite of prime brokerage services to hedge funds tailored to their financial objectives.

These real-world examples provide prospective clients with a tangible understanding of the prime broker’s value proposition and the benefits they can expect to receive. Investingintheweb.com does not provide any offer or solicitation to buy or sell any investment products, nor does it constitute an offer to provide investment advisory services. The material on this website is for informational purposes only and we make no guarantees as to the accuracy or completeness of its content – it is subject to change, so please conduct your own due diligence. This website is free to use but we may receive commission from some of the merchants mentioned. The new credit prime functionality opens up the financing business to a wider range of systematic long/short credit funds, which have been one of the biggest growth areas in the hedge fund market, thanks to the increasing electronification of the credit bond market. Two common types of clients are pension funds, a form of institutional investor, and commercial banks.

For example, the bank can cross-margin bank loans with other bonds held within the prime broker account or on total return swaps. By cross-margining the bank loans within the same portfolio, clients can use the PB’s excess long to collateralise bank loans, eliminating the need for a separate pool of collateral. Clients can also reap the benefit of having a larger portfolio by combining with the broader equity and bond holding – diversifying some of the issuer risk and making margin rates more competitive. UBS has also added client-side enhancements, including pre-trade credit checking solutions, collateral optimisation solutions, and client-to-client trading to cater for the increasing number of clients wishing to trade with each other on the platform. For Saxo Bank, extending a credit- and clearing-only service is as much about adding value to its existing client base as it is engaging a new audience. The bank will continue to focus on its institutional remit of banks, brokers and wealth managers, but with the requisite proposition to capitalise on opportunities with more established clients, typically with more nuanced liquidity needs.

“Offering those big clients disclosed, bilateral trading opportunities and access to major liquidity venues, together with our own managed liquidity, completes a compelling proposition where synergies of scale can be capitalised on by both parties. Saxo Bank is poised to leverage its keen understanding of business-to-business-to-client dynamics and the technology and service expectations of the globally significant intermediaries it serves. The bank recognises that substantial users of FX liquidity expect flexibility in the services their partners offer. Greater control of relationships with executing brokers and liquidity venues will be attractive to many.

Given the enormous profit levels coupled with the increasing demand for prime brokerage services, many mid-sized financial institutions have penetrated the market and have built sizeable prime brokerage businesses. As a result of these new entrants, the market share of the ten largest prime brokers has eased to about 70% from 80% a decade ago. We expect a further distribution of market share as well as tighter margins despite efforts by the larger investment banks to do whatever it takes to reverse the trend. The increased demands on these 3rd-parties have created intensely competitive environments, especially amongst prime brokers.

In the face of increasing regulatory scrutiny and market volatility, leading prime brokers have implemented robust risk management strategies to ensure the stability and resilience of their operations. Prime brokerages, at times referred to as prime brokers, are generally larger financial institutions that have dealings with other large institutions and hedge funds. The majority of large banks have prime brokerage units that service hundreds of clients.

• It offers customised client services, competitive rates, and stability of borrowing.
• Prime brokerage services are provided to institutional clients by major investment banks such as Merrill Lynch and Goldman Sachs.
• Use of leveraged commodity-linked derivatives creates an opportunity for increased return but, at the same time, creates the possibility for greater loss.
• The fund has limited resources that it can allocate to the various needs that are required of the business.
• Prime brokers are subject to increased reporting and disclosure requirements, both to regulators and their clients.

Our four decades of focus on technology and automation has enabled us to equip our clients with a uniquely sophisticated platform to manage their investment portfolios. We strive to provide our clients with advantageous execution prices and trading, risk and portfolio management tools, research facilities and investment products, all at low or no cost, positioning them to achieve superior returns on investments. For the sixth consecutive year, Barron’s ranked Interactive Brokers #1 with 5 out of 5 stars in its June 9, 2023, Best Online Brokers Review. The global prime brokerage industry is a dynamic and rapidly evolving sector within the financial services landscape. As outlined in this comprehensive overview, the industry is characterized by intense competition, regulatory scrutiny, technological innovation, and shifting client demands. Leading prime brokers are continuously adapting to these challenges by prioritizing client satisfaction, implementing robust risk management strategies, exploring emerging markets, and embracing digital disruption.

Prime brokerage services are provided by most of the largest financial services firms, including Goldman Sachs, UBS, and Morgan Stanley, and the inception of units offering such services traces back to the 1970s. Interactive Brokers has a strong capital position, conservative balance sheet, and automated risk controls designed to protect the company and hedge fund clients. Preqin’s 2023 Service Providers Report ranks Interactive Brokers as the top prime broker for hedge funds with AUM up to USD 50 million and the fifth largest prime broker overall by number of hedge funds clients. According to Preqin, Interactive Brokers has been one of the fastest-growing prime brokers for the fourth consecutive year. High Touch Prime Brokerage through Interactive Brokers offers access to a dedicated Relationship Manager who serves as a single point of contact for support and has a deep understanding of their client’s trading strategy and requirements.

They can also provide valuable advice on how to avoid costly mistakes, making them a crucial part of a hedge fund manager’s team. Additionally, a prime broker’s capital introduction service can help fund managers raise capital more efficiently by connecting them with the right investors at the right time. As one of the Top Prime Brokers, Interactive Brokers offers a wide range of services, including trading, clearing, custody, reporting, and securities financing, to hedge funds. The company is focused on delivering cost-sensitive solutions that provide real advantages to institutions through around-the-clock global service coverage and a strong balance sheet that ensures customer fund protection and consistent performance. With more than 45 years of experience in the trading industry, IG provides institutional prime services, offering synthetic, custody, trading, and financing solutions to a diverse range of clients, including hedge funds. Goldman Sachs is one of the What Are Prime Numbers 1 To 101, the world’s major investment company, and a leader in hedge funds and PB services.

Prime broker service providers can either be independent or a part of a larger financial institution. They can be considered a manager of brokers, seeking to execute an asset manager’s trades as efficiently as possible. The role served by a prime brokerage is that of facilitating large, active trading operations such as hedge funds. A prime broker can be thought of as a sort of central broker, facilitating and coordinating extensive, complex trading in a variety of financial instruments. Clearing is a procedure for conducting non-cash payments between financial entities for goods, services, shares, etc.

By consistently monitoring client feedback and addressing any pain points or areas of concern, prime brokers can continuously improve their services and maintain a high level of client satisfaction. This past year, the bank has added complementary capabilities that will help sustain its prime brokerage ambitions. It devised a way to cross-margin bond repos with offsetting futures – a useful addition for macro funds doing basis trades. 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.

For example, the platform offers cash management tools that enable hedge funds to move cash rapidly and seamlessly, with careful and transparent oversight in place. This includes initiating multiple outgoing wire transfers, incoming receipts, and cash journals simultaneously, customize and share views, upload multiple payments/receipts, instructions, or journals, and approve transactions with just two clicks. A leading provider of prime brokerage and execution services to hedge funds, offering multi-asset execution, integrated custody, clearing, and post-trade services across a wide range of markets and instruments. In contrast to some competitors that have restricted their prime brokerage client base over the years, UBS has actually expanded and diversified the type of market participants it serves. Prime brokers provide a wide variety of custodial and financial services to their hedge fund clients, including acting as an intermediary between hedge funds and two key counterparties. The first of these important counterparties are large institutional investors, such as pension funds, that have massive equity holdings and, therefore, serve as a source of securities to lend for short-selling purposes.

Publically traded online trading platforms like IG, CMC Markets, City Index (owned by StoneX) and Interactive Brokers are generally safer as they must report their financial status to the stock exchange and investors more frequently than private companies. By keeping an eye on a company’s share price you can see how healthy its balance sheet is. StoneX Outsourced Trading services are provided by StoneX Outsourced Services LLC, an SEC and CFTC registered broker dealer and member of FINRA, NFA and SIPC. The information contained herein is not intended to provide a sufficient basis on which to make an investment decision and should not be regarded as an offer to sell or a solicitation of an offer to buy any security or financial product. Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments involve leverage.