Prime brokers are typically investment banks which are able to sell clients, often hedge funds, a 'one-stop shop' service.
These clients expect the banks to handle trades in securities that may be complex, illiquid and denominated in multiple currencies, quickly find counterparties that can lend stock so a hedge fund can 'sell short', manage 'margin' requirements for complex derivatives positions (handling the calculations and notifying the fund when more collateral is required) and assist with the regulatory reporting and accounting requirements that arise on a large, diverse portfolio.
Banks that have all of this expertise can command big fees in return.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Will Labour scrap the British ISA?While it was the brainchild of the Conservatives, the British ISA received little love and now it seems Rachel Reeves may scrap the idea altogether. What does this mean for the ISA landscape?
-
Direct Line returns to profit but loses almost 500,000 customers - here is what it meansDirect Line posted a pre-tax profit of £61.6m for the six months to June 30, compared to losses of more than £75m a year ago - what does it mean for the insurance sector?
