Prime brokers provide an all-in-one trading and investing account for institutional traders and hedge funds. Start-up and small hedge funds, professional traders and institutions can use our prime broker finder service to connect with the most appropriate prime brokers for their specific style of trading. We have partnered with some of the best prime brokers based in the UK and regulated by the FCA and have two decades of experience in the institutional brokerage space and through our network of multi-asset prime brokers, we are able to connect funds with the most appropriate brokers, salespeople, traders, and institutional service providers.
Prime Broker Finder
In this guide to prime brokers we will explain what a prime broker does, who they do it for and which type of prime broker is more appropriate for specific types of client.
What is a prime broker?
Prime brokers provide trading and investing services to professional and institutional clients. Prime brokerage clients’ are split by size and asset class. But, the largest prime brokers in the world only accept very large clients so smaller and start-up hedge funds, brokers and traders must use a specific type of prime broker more appropriate to their trading.
The purpose of a prime broker is to act as the consolidated portfolio, risk and services account for a hedge fund. Their primary purpose is to allow hedge funds or large investment clients the ability to borrow securities or cash to trade and invest in order to achieve absolute returns.
Often hedge funds trade with many different brokers throughout the day who will then “give up” trades to the price broker where the bulk of a fund’s assets are held. Whilst the prime broker may handle the majority of a hedge fund’s execution it is normal for funds to spread business across multiple brokerage accounts to ensure that trades are executed with discretion and finesse.
Prime brokers also offer access to their client pool for capital introduction to increase the net asset value of hedge funds. This is also common with competing brokers who will want to add value to win execution business to generate commission.
Prime broker services
Prime brokers facilitate investment activity on behalf of a hedge fund very often with capital borrowed against the hedge fund itself. As hedge funds can be active with numerous brokers, a prime broker enables greater visibility on performance as all trades are settled through the prime broker. Their responsibilities can vary depending upon what is right for you and your hedge fund.
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.
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.
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.
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.
Prime Brokers FAQs:
Good Money Guide can help you find the right prime broker with our prime broker finder tool. You will have a few questions to answer about the size of your hedge fund, your main investment methods and how often you trade, as well as any additional features that you may require. The finder tool will take about 10 minutes to complete.
A mini prime broker is simple a prime broker that accepts small institutional accounts. Mini prime brokers are more appropriate for start-up and new hedge funds. Use our comparison tables to compare the best UK based mini prime brokers authorised and regulated by the FCA. Choose or switch to a mini prime broker that offers the most markets, best pricing and client security.
Prime brokers are for institutional accounts so there is not a definitive list of prime brokers. However, with our prime broker comparison service, you can choose from prime brokers which may suit your needs and which can make it easier to choose the best prime broker for you.
The top-tier prime brokers are shutting down all their smaller accounts so start-up hedge funds need a mini prime broker or mid-tier prime broker.
Our prime broker finder tool can help your start-up hedge fund find top prime brokers that are most appropriate for your investment strategy.
If you have a small hedge fund take you can find a mini prime broker here. We work with the best prime brokers for small to medium-sized hedge funds that can assist with your trading and fund strategy, including custodian services, regulatory umbrellas, research, analysis and outsourced back-office systems. Use our comparison tables to compare the best UK-based mini prime brokers authorised and regulated by the FCA. Choose or switch to a mini prime broker that offers the most markets, best pricing and client security.
Prime brokers make money by charging a fee or commission for facilitating the transactions for the funds that they manage. This fee is normally called a “spread”.
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.
There is no guarantee that any trading platform will not go bankrupt, but there are ways to keep an eye on the health of the company behind it.
Funds up to £85k are predicted by the FSCS if a broker defaults, but not above that amount, unless insurance is in place.
An FX prime brokerage can offer access to the currency markets around the World at the best prices, as well as funding and clearing services to foreign exchange traders. In addition to the provision of securities, collateral and operational efficiencies there can be many other benefits for forex traders.
Larger prime brokers focus on providing wholesale services to large clients who can then provide the most relevant version of a large prime brokers services to the end client. This enable large prime brokers to focus on their core clients and smaller prime brokers to provide a more appropriate bespoke service to small hedge funds and traders.
While some prime brokers are proprietary trading firms, that does not make all proprietary trading firms prime brokers. A proprietary trading firm is a firm that trades it’s own money, whereas a prime broker is a firm that providers brokerage services to traders, funds and smaller brokers reselling their services.
Yes, funds can transact and execute trades through more than one prime broker. However, funds will have to nominate a single prime broker as their main account.
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.