What is a prime brokerage arrangement?

A prime brokerage is a bundled group of services that investment banks and other financial institutions offer to hedge funds and other large investment clients that need to be able to borrow securities or cash in order to engage in netting to achieve absolute returns.

What is a mini prime broker?

Mini-prime brokers are registered broker-dealers that essentially act as introducing firms to the prime brokers and handle the front end relationship while the trading, execution, clearing and custody are handled through the back end of the large prime brokerage firms.

What is prime brokerage in Forex?

OVERVIEW OF FX PRIME BROKERAGE. FX Prime Brokerage is a service wherein a Designated Party—the “customer”—is allowed to use the trading lines of an FX Prime Broker to execute foreign exchange transactions with a dealer, called the Executing Dealer.

What is the difference between prime broker and executing broker?

These brokers are usually housed under a prime brokerage service, which offers a one-stop-shop service for large active traders. The executing broker earns a commission on the buy-sell spread and passes along the execution to the settlement and clearing group of the prime brokerage.

What is a Form 1 Schedule a prime broker?

The completed Form 1 shall contain the name of each Introducing Broker, if applicable. (b) Prime Broker shall provide to Executing Broker, upon request, information with respect to a Customer or a Customer’s Account(s), if the Customer has authorized Prime Broker to do so in writing.

How does a prime broker make money?

The prime brokerage makes money by charging a fee, such as a spread or premium on the loan from a commercial bank, in return for facilitating the transaction. This simplifies reporting and operations for the hedge fund since the prime broker also typically serves as the custodian for the hedge fund’s assets.

Is prime brokerage profitable?

Because they can earn money in several ways, prime brokerage units can make a nice profit for firms. First, brokerages charge basic fees for custody, concierge, and other services. Prime brokerages also earn very large sums from the spread in interest rates between their borrowing and lending operations.