Prime brokers provide hedge funds with the infrastructure they need to trade, finance positions and manage operations efficiently. I’ve worked with institutional trading firms for many years and regularly review prime brokers based on their execution, financing, securities lending, market access and post-trade services. Choosing the right prime broker is particularly important for hedge funds, as costs, balance-sheet access, technology and counterparty relationships can have a significant impact on performance and scalability.
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What services do prime brokers provide hedge funds?
Prime brokerage services a hedge fund requires can vary considerably with its size. Smaller hedge fund managers for instance, showed greater interest in tokenisation, with 37% of sub-$1 billion firms exploring it in 2026, compared with 24% of larger hedge fund managers, according to IG Prime’s The State of the Hedge Fund Industry.
Below is a breakdown of the key services that hedge funds should expect from a prime broker.
Trade execution
Prime brokers have experienced dealers to manage online trading with more complex order voice brokerage services. Prime brokers will provide their clients with an online trading platform with dedicated lines as well as dealers to execute orders over the phone (voice dealing).
Clearing & give-ups
Prime broker clients can trade through smaller brokers and spread orders across multiple execution brokers, then give up to a main clearing prime broker to maintain execution anonymity. Brokers give up trades so that their underlying clients can spread orders across different dealers to reduce market movement.
Securities lending
When hedge funds and traders have short positions the underlying shares need to be borrowed. Prime broker’s securities lending departments enable their clients to borrow securities directly from a prime broker to reduce financing costs and the risk of holding a long-term short-position.
Clients services
Prime brokers will have dedicated client services departments to provide back-office support for their clients to handle complex corporate actions, clearing issues, and general account management.
Risk management & financing
Clients of prime brokers can manage cross-exchange positions with SPAN margin facilities to ensure minimal margin requirements on hedged and offset positions with overall portfolio risk management.
Reporting & portfolio technology
A hedge fund can outsource the proper compliance and regulatory processes needed to run a hedge fund to their prime broker through consultancy services and risk management technology.
Capital introduction
One of the major value adds of prime brokers is their network of clients. Hedge funds can take advantage of a prime broker’s network to generate an inflow of capital and new business and increase their visibility.
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Emerging funds are particularly likely to need cost-effective technology, reporting and capital-introduction support, with three-quarters identifying fundraising as their main challenge. Larger funds are more likely to require extensive financing capacity, cross-asset coverage, deep liquidity and sophisticated collateral and risk management.
Do small hedge funds need prime brokers or a DMA trading platform?
If you are setting up or running a small hedge fund, you may be wondering whether you need a prime broker or whether a Direct Market Access (DMA) trading platform is enough.
Essentially, if you are running a personal hedge fund or a family office, you are probably ok with a DMA trading platform like Interactive Brokers, as larger accounts are assigned a personal account executive, and as IBKR offers institutional services as well, you will get access to the majority of prime services.
However, if your hedge fund requires regulated reporting to a pool of external investors, no matter how small, you will require a prime broker.
All decent prime brokerages include DMA trading, but as a small hedge fund you may not qualify for prime brokerage services. You can use our prime broker finder to check to see if your fund qualifies for prime brokerage. Any broker that claims to be a prime broker, but does not offer direct market access, is not really a proper prime broker.
What is the difference between DMA and prime brokerage?
A DMA trading platform is primarily about execution. It lets a hedge fund send orders directly to exchanges or other trading venues, giving the manager control over price, timing, order types and execution.
Prime brokerage provides the wider infrastructure needed to operate more complex hedge fund strategies. Prime brokers typically provide financing, securities lending, custody, clearing, settlement and reporting.
When does a small hedge fund need a prime broker?
A small fund running a relatively straightforward long-only strategy in liquid markets may find that institutional DMA combined with suitable custody and clearing arrangements provides what it needs.
However, if your hedge fund wants to short stocks, borrow securities, use significant leverage or execute through several brokers while consolidating positions centrally, prime brokerage becomes much more important.
DMA and prime brokerage are not necessarily alternatives. A hedge fund can use DMA for execution while its prime broker provides financing, stock borrowing, custody and post-trade services.