Prime Brokerage: The 9 Best Prime Brokers in 2024
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- Best Prime Brokers List: Prime Brokerage Services for September 2024:
- Prime Brokers' Comparison Chart September 2024
- Prime Brokerage Rankings for September 2024
- What Is Prime Brokerage?
- What Is Included in Prime Brokerage Services?
- What Does a Prime Broker Do? (With Examples)
- Requirements for Prime Brokerage Accounts
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- How Do Prime Brokers Make Money?
- Differences Between Prime Brokers and Other Financial Institutions
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- How to Choose a Prime Broker in 2024
- Frequently Asked Questions
- Final Thoughts
Best Prime Brokers List: Prime Brokerage Services for September 2024:
- IG
- Goldman Sachs Prime Brokerage
- Morgan Stanley Prime Brokerage
- J.P. Morgan Prime Brokerage
- Credit Suisse Prime Brokerage
- Bank of America Prime Brokerage
- UBS Prime Brokerage
- BNP Paribas Prime Brokerage
- Barclays Prime Brokerage
Prime Brokers' Comparison Chart September 2024
Regulation FCA, ASIC, CFTC, NFA | Trading Platforms IG Web Platform, MT4, L2 Dealer | Minimum Deposit $250 | |||
Regulation SEC, FINRA, others | Trading Platforms Proprietary platforms | Minimum Deposit Unknown | |||
Regulation SEC, FINRA, others | Trading Platforms Proprietary platforms | Minimum Deposit Unknown | |||
Regulation SEC, FINRA, others | Trading Platforms Proprietary platforms | Minimum Deposit Unknown | |||
Regulation SEC, FINMA, others | Trading Platforms Proprietary platforms | Minimum Deposit Unknown | |||
Regulation SEC, FINRA, others | Trading Platforms Proprietary platforms | Minimum Deposit Unknown | |||
Regulation SEC, FINMA, others | Trading Platforms Proprietary platforms | Minimum Deposit Unknown | |||
Broker BNP Paribas | Regulation ECB, ACPR, others | Trading Platforms Proprietary platform | Minimum Deposit Unknown | ||
Broker Barclays | Regulation PRA, FCA, others | Trading Platforms Proprietary platform | Minimum Deposit Unknown |
IG: Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of IG retail investor accounts lose money when trading spread bets and CFDs with IG. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Prime Brokerage Rankings for September 2024
1. IG
Pros
- Highly regulated
- MetaTrader 4 (MT4)
- Over 10,000 instruments
- Available in the UK and US
- 24/7 customer support
Cons
- High fees
- No deposit compensation scheme for US accounts
- No copy trading
- Inactivity fees
IG is a great share trading platform for beginners thanks to its user-friendly interface and extensive educational resources.
Pros of IG include a wide range of trading instruments and markets, as well as the ability to access multiple account types and trading platforms. The platform also offers a demo account for beginners to practise trading strategies before investing real money.
However, IG isn’t the cheapest share trading platform, with relatively high trading fees and a minimum deposit requirement of £250 when paying by credit/debit card or PayPal.
In terms of additional fees, IG charges a commission fee for share trading, starting from £8 per trade. There’s also a custody fee of 0.25% per year for holdings of £250 or more.
Overall, IG is a solid choice for beginners looking for a user-friendly platform with extensive educational resources, but investors should be aware of its fees and minimum deposit requirements.
2. Goldman Sachs
Pros
- Well established firm with extensive history
- Well regulated
- One of the big players in prime brokerage
Cons
- Unlikely to suit smaller hedge funds
Despite its role in the 2008 recession, Goldman Sachs is a leader in hedge funds and prime brokerage services.
It offers:
- Agency securities lending
- Capital introduction
- Clearing
- Customized client services
- Derivatives clearing services
- Futures
- Hedge fund consulting
- Reporting and technology
- Risk management and financing
- Securities lending
- Synthetics
Client feedback states that it offers competitive rates, as well as availability and stability of borrowing.
In a 2020 Trade News survey, Goldman Sachs averaged:
- 5.83 overall
- 5.66 for trading and execution
- 6.03 for stock borrowing and lending
- 6.08 for foreign exchange prime brokerage
- 6.14 for Delta 1, swaps and financing
- 5.42 for fixed income
- 5.64 for OTC clearing
- 5.84 for listed derivatives
3. Morgan Stanley
Pros
- Prime brokerage business has been established for over three decades
- Commitment to a strong ethos of partnership
- One of the big players in prime brokerage
Cons
- May be difficult for smaller hedge funds to access
Morgan Stanley offers:
- Wealth management
- Investment management
- Research
- Sustainable investing
- Inclusive innovation
The 2020 Trade News survey scored Morgan Stanley:
- 5.88 overall
- 6.04 for trading and execution
- 6.23 for stock borrowing and lending
- 5.25 for foreign exchange prime brokerage
- 6.27 for Delta 1, swaps and financing
- 5.58 for fixed income
- 5.95 for OTC clearing
- 5.81 for listed derivatives
4. J.P. Morgan
Pros
- Stable, established firm with extensive history
- Operates in 30 countries
- One of the big players in prime brokerage
Cons
- Unlikely to suit smaller hedge funds
J.P. Morgan is considered Goldman Sachs's closest rival when it comes to prime brokerage.
In 2019 it surpassed the $500 billion milestone and the company reports 25% year-on-year increases.
Its prime services include:
- Insights
- Finance solutions
- Capital Advisory Group
- Derivatives clearing and intermediation
- Customer service
However, client feedback claims that it does not offer as much support to smaller accounts and prefers to focus on where the big money is.
The 2020 Trade News survey scored J.P. Morgan:
- 5.64 overall
- 5.25 for trading and execution
- 5.74 for stock borrowing and lending
- 5.00 for foreign exchange prime brokerage
- 5.56 for Delta 1, swaps and financing
- 5.52 for fixed income
- 6.38 for OTC clearing
- 6.00 for listed derivatives
5. Credit Suisse
Pros
- Established firm with an extensive history
- 24/7 support
Cons
- Has previously demonstrated a lack of effective risk management
- Prime brokerage services more restricted than some competitors
This Swiss bank has a reputation for taking a risk too far, and 2020 saw it enter several legal battles.
But for those who have no fear of risk, Credit Suisse's prime services include:
- Finance, custody and clearing services
- 24/7 support
- Market access, execution and reporting
- Securities lending
- Derivative services
- Capital services
- Consultancy
- Risk advisory
The 2020 Trade News survey scored them:
- 5.28 overall
- 5.63 for trading and execution
- 5.32 for stock borrowing and lending
- 6.33 for foreign exchange prime brokerage
- 5.44 for Delta 1, swaps and financing
- 4.33 for fixed income
- 5.20 for OTC clearing
- 4.68 for listed derivatives
6. Bank of America
Pros
- Established firm with a solid reputation
- Caters to a range of hedge fund sizes
Cons
- Not as strong as competitors on foreign exchange prime brokerage
Bank of America promises to deliver expert institutional advisory services and global coverage. Its prime services are categorized into core and value-added.
Its core services are:
- Financing
- Securities lending and Delta 1
- Client services
- Reporting and technology
The value-added services are:
- Business consulting
- Capital strategy
- Structured finance
In the 2020 Trade News survey, Bank of America scored:
- 5.02 overall
- 5.21 for trading and execution
- 5.27 for stock borrowing and lending
- 3.75 for foreign exchange prime brokerage
- 6.12 for Delta 1, swaps and financing
- 4.73 for fixed income
- 5.00 for OTC clearing
- 5.09 for listed derivatives
7. UBS
Pros
- 24/7 support
- Strong on securities lending and foreign exchange services
- Works with a range of fund sizes
Cons
- Unlikely to match the services of competitors for very large hedge funds
UBS prides itself on building long-term successful relationships with funds of all sizes and types.
Its services are tailor-made and adapt to your growth.
Services include:
- Global clearing
- Custody
- Flexible financing solutions
- Full accounting support
- Access to foreign exchange and fixed income platforms
- Business consulting
- Capital introduction
- Cross-product risk-based lending
- 24/7 support
The firm did not feature in the 2020 Trade News survey. However, in a similar hedge fund survey conducted in 2016, UBS scored 5.61 for customer service, 5.60 for reporting and 5.62 for value.
8. BNP Paribas
Pros
- Excellent technology and software
- Offers a wide range of services
- Excellent reputation
- One of the top European prime brokers
Cons
- May be difficult for smaller hedge funds to access
In 2020, French bank BNP Paribas took over the German Deutsche Bank's prime brokerage services.
Past clients have stated that BNP is professional, efficient and that the customer service team is incredibly knowledgeable.
The technology and software the bank uses are reported as being flawless with little to no mistakes.
The prime broker services include:
- Financing
- Securities lending
- Technology and reporting
- Execution services
In the 2020 Trade News survey, BNP Paribas scored:
- 6.26 overall
- 6.05 for trading and execution
- 6.16 for stock borrowing and lending
- 6.48 for foreign exchange prime brokerage
- 5.96 for Delta 1, swaps and financing
- 6.48 for fixed income
- 6.42 for OTC clearing
- 6.24 for listed derivatives
These results make it one of the best-performing prime brokers of 2020.
9. Barclays
Pros
- Strong in swaps and financing
- Strong in securities lending
- Top UK alternative to US-based prime brokers
Cons
- Unlikely to match the services of top competitors for very large hedge funds
As another British bank gaining popularity in prime brokerage, Barclays now has a place in the middle of the industry league tables.
Its strength is its securities lending, but other services include:
Its Trade News scores are:
- 5.75 overall
- 5.71 for trading and execution
- 5.81 for stock borrowing and lending
- 5.88 for foreign exchange prime brokerage
- 6.18 for Delta 1, swaps and financing
- 5.83 for fixed income
- 5.67 for OTC clearing
- 5.18 for listed derivatives
What Is Prime Brokerage?
A prime brokerage is a collection of services offered to hedge funds that regular brokers and individual traders do not have access to.
The purpose of these services is to help hedge funds access to research, borrow securities or cash and find new investors. It also allows them to outsource many of their investment activities and focus on strategy and goals. Prime brokers are usually investment banks or financial institutions. They act as a central broker, facilitating and co-ordinating complex and high-value trades.
Generally, only the highest-grossing financial institutions offer prime brokerage services, such as Goldman Sachs and Morgan Stanley, as the institution needs to meet a minimum account size.
What Is Included in Prime Brokerage Services?
Prime broker services are usually tailor-made and customized. However, all brokers offer similar fundamental services, including:
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Acquiring new investors – Usually termed as capital introduction services, a broker will set up meetings and deliver presentations to those interested in investing.
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Short-selling and borrowing cash – This enables the hedge fund to get extra money and increase returns. Short-selling is a complex trading strategy that comes with a lot of risks. It was a contributing factor towards causing the Great Depression and should only be used by experienced traders.
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Providing data, research and analytical reports – Prime brokers have robust research departments with a high data turnover. As trades happen globally, customer support is usually 24/7, with up-to-date information being available at all times.
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Dedicated advisors – Financial regulations are extensive, complex and constantly changing. Hedge funds may not be able to keep up with regulations or understand them properly. Dedicated advisors know all the regulations applicable to their clients.
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Custodians of assets – Being a custodian allows the broker to move far quicker on trades and removes some of the decision-making from the hedge fund. As the broker has access to the assets, financial reporting also becomes simpler.
What Does a Prime Broker Do? (With Examples)
Let's say that a hedge fund wants to execute a trade for a large number of shares of a company's stock.
The hedge fund may not have enough cash on hand to purchase all the shares it needs, so it contacts a prime broker to help facilitate the trade.
The prime brokerage may provide the hedge fund with financing to purchase the shares, using the hedge fund's existing portfolio as collateral.
The prime brokerage may also provide the hedge fund with access to its trading platform, allowing the hedge fund to execute the trade directly through the prime broker.
Once the trade is executed, the prime broker will typically handle the settlement and clearance of the trade, ensuring that the shares are properly transferred to the hedge fund's account.
The prime brokerage may also provide the hedge fund with a range of other services, such as securities lending, margin financing and risk management tools.
In exchange for these services, the prime brokerage will typically charge the hedge fund a fee.
This fee may be based on a percentage of the value of the trade, or on a flat fee basis.
The fee structure may vary depending on the services provided and the size of the trade.
Requirements for Prime Brokerage Accounts
Prime brokerage accounts are specialized accounts provided by financial institutions to serve the needs of professional traders and institutional clients.
The requirements to open an account may vary depending on the institution, but here are some general requirements:
Eligibility
Prime brokerage accounts are typically reserved for institutional clients and high-net-worth individuals.
Most financial institutions require clients to meet certain financial eligibility criteria before they can open a prime broker account.
Minimum Deposit
Prime brokerage accounts usually require a minimum deposit to open an account. This amount can vary significantly, but it can range from hundreds of thousands to millions of dollars.
Experience
Financial institutions may require clients to demonstrate a certain level of trading experience to qualify for a prime brokerage account. This can include providing information on previous trading experience, investment knowledge, and professional qualifications.
Trading Volume
Prime brokerage accounts are typically designed for high-volume traders. Financial institutions may require clients to demonstrate a certain level of trading activity or a minimum amount of assets under management.
Due Diligence
Financial institutions conduct thorough due diligence on potential prime brokerage clients before accepting them. This may include background checks, credit checks, and financial history checks.
Compliance
Prime brokerage clients must comply with various regulatory requirements, including anti-money laundering regulations, know-your-customer rules, and other compliance measures.
Legal Agreements
Prime brokerage clients may need to sign various legal agreements, including a client agreement, risk disclosure statement, and other documentation.
Overall, the requirements for opening a prime brokerage account are typically more stringent than those for retail trading accounts. It's important to do your research and carefully consider the costs and benefits of opening a prime brokerage account before making a decision.
How Do Prime Brokers Make Money?
The goal of any business is to make money, and financial institutions are no different.
Prime brokers make money through:
- Basic fees for custody, concierge and other core services
- The spread in interest rates between borrowing and lending transactions
- Collateral from their clients to use for their investment ventures
The latter is known as rehypothecation. The hedge fund or partner usually agrees to allow the prime broker to use collateral in return for a reduction of fees.
Hypothecation was very popular before the 2008 crash. After the Lehman Brother's collapse, hedge funds became more cautious of the risk of rehypothecation and began revoking permission.
Differences Between Prime Brokers and Other Financial Institutions
Prime Broker vs Executing Broker
An executing broker is a financial institution that executes trades on behalf of clients, typically retail investors or smaller institutional investors.
They do not typically offer the range of services provided by a prime brokerage, such as financing, securities lending and risk management.
The main difference between a prime broker and an executing broker is that the former provides a suite of services to larger institutional investors, while the latter primarily executes trades for retail investors.
Prime Broker vs Custodian
A custodian is a financial institution that holds and safeguards assets on behalf of clients.
They do not typically offer the range of services provided by a prime brokerage.
The main difference between a prime broker and a custodian is that the former provides a range of services to institutional investors, while the latter primarily focuses on custody and safekeeping of assets.
Prime Broker vs Market Maker
A market maker is a financial institution that provides liquidity to markets by buying and selling securities on a regular basis.
The main difference between a prime broker and a market maker is that the former provides a suite of services to institutional investors, while the latter primarily focuses on providing liquidity to the markets.
How to Choose a Prime Broker in 2024
The financial institutions that offer prime brokerage do so because they are good at finance and investing.
But before making your final decision, consider the following:
Step 1. Research
Is your potential broker able to demonstrate a complete understanding and knowledge of fixed and variable fees and commissions? A broker that is not forthcoming with this information may turn out to be suspicious or inadequate.
Step 2. Compare different platforms
How is its trading platform and market relations? When dealing with hedge fund value transactions, you want the best trading platform, the most innovative technology and up-to-date data.
Step 3. Ask questions
Is it experienced and does it understand your financial strategy and goals? Is it also familiar with other strategies that you may want to add as your business grows?
Step 4. Query security
Will it be able to provide you with the securities lending and financing that you need? Some securities are hard to borrow, and some strategies need greater leverage. To see if your prime broker can accommodate your needs, run through some scenarios to see how it handles them before making your final decision.
Step 5. Look into the service
What level of support can your prime broker offer you? Does it offer a capital introduction service? If so, what can you expect in terms of market access and geographical reach?
A prime broker is a financial institution that provides a range of services to hedge funds, asset managers and other institutional clients.
These services typically include custody of assets, clearing and settlement of trades, financing and access to liquidity.
The biggest prime broker by market share is typically JP Morgan, followed by Goldman Sachs, Morgan Stanley and other large investment banks.
Prime brokers typically charge a combination of fees for their services, including custody fees, margin interest and commissions on trades.
The specific fees charged by each broker can vary widely depending on the services provided and the size of the client's portfolio.
When choosing a prime broker, clients should consider factors such as the broker's reputation and track record, the range of services offered and the fees charged.
It's also important to consider the broker's financial stability and regulatory compliance.
Yes, prime brokers are typically regulated by financial authorities in the countries where they operate, such as the SEC in the United States or the FCA in the UK.
Regulatory oversight helps to ensure that prime brokers operate in a transparent and ethical manner, and that clients' assets are protected.
Prime brokers offer a range of services to institutional clients, such as financing, securities lending, trade execution, clearing and settlement, risk management, and reporting.
They also provide access to a variety of financial instruments, including equities, fixed income securities, derivatives and foreign exchange.
Prime brokers offer customized services tailored to meet the needs of each client, including customized reporting and risk management solutions.
Institutional clients, such as hedge funds, investment banks and high net worth individuals, typically use prime brokers.
These clients require access to liquidity, efficient trade execution and customized services, which prime brokers can provide.
Prime brokers offer access to a variety of financial instruments, including equities, fixed income securities, derivatives and foreign exchange.
They also provide access to alternative investments such as private equity, real estate and hedge funds.
Clients can trade a range of assets through prime brokers, including stocks, bonds, currencies, commodities and options.
Prime brokerage differs from traditional brokerage in that it caters to institutional clients rather than retail clients.
Prime brokers offer a range of services tailored to meet the needs of each client, including financing, securities lending, trade execution, clearing and settlement, risk management, and reporting.
They also provide access to a wider range of financial instruments and markets than traditional brokers.
Prime brokerage requires clients to meet certain eligibility criteria, including minimum account balances and regulatory compliance, and offers customized services and solutions for each client.
Using a prime broker involves several risks, including counterparty risk, operational risk and credit risk.
Counterparty risk arises when the prime broker fails to fulfill its contractual obligations, while operational risk is the risk of loss resulting from inadequate or failed internal processes, systems or external events.
Credit risk is the risk that the prime broker will default on its financial obligations.
The qualifications for becoming a prime broker are extensive knowledge of financial markets, expertise in risk management and financial engineering, and the ability to provide financial services and advice to institutional clients.
Additionally, prime brokers need to have a strong reputation, solid financial resources and advanced technological infrastructure to support their operations.
Prime brokers handle client assets by holding them in segregated accounts that are distinct from the firm's operating accounts.
This separation ensures that the client's assets are protected in the event of the prime broker's insolvency.
Prime brokers also provide margin financing, securities lending and trade execution services to their clients, among other services.
The prime broker may also offer investment advice or provide access to research to assist clients in making investment decisions.
Yes, there are firms that provide crypto prime brokerage services. Crypto prime brokerage services are designed to cater to institutional investors and high-net-worth individuals who want to trade and manage their cryptocurrency assets in a more sophisticated and comprehensive manner.
These services often include features such as access to multiple exchanges, advanced trading tools, lending and borrowing of cryptocurrencies, portfolio management, risk management, and more.
A prime broker is a financial institution that provides a range of services to institutional investors, such as hedge funds, mutual funds, pension funds, and high-net-worth individuals, to facilitate their trading activities and investment strategies. Prime brokers play a crucial role in the financial industry by acting as intermediaries between the clients and various financial markets, helping clients execute trades, manage risk, and optimize their investment operations.
A prime brokerage agreement is a legal contract between a prime broker and an institutional client, such as a hedge fund, mutual fund, or other investment firm. This agreement outlines the terms and conditions under which the prime broker will provide a range of financial services to the client.
These services typically include execution of trades, custody of assets, lending and borrowing services, risk management, reporting, and other services that facilitate the client's trading and investment activities.
To open a prime brokerage account, research and select a firm that meets your needs, considering services, fees, and reputation. Contact the firm, provide detailed information about your investment firm, undergo due diligence checks, negotiate terms, submit necessary documentation, sign the agreement, fund the account, and start trading once the account is set up.
Final Thoughts
Regardless of the institution, prime brokers offer a high level of service and innovation.
Choosing the right one ultimately depends on:
- Which institute aligns with your values and mission
- Which provides the best package for you
- What your financial goals and strategies are
Before making any final decision, take the time to sit with the representatives, run through any scenarios you have, and ask all the questions you need.
WikiJob does not provide tax, investment or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.