Its strong points include:
No minimum first-time deposit No commissions Several payment methods for deposits and withdrawals Tight spreads from 0.5 pips
It offers one of the best execution speeds in the industry with low latency below 0.004s. It utilizes the most advanced technology to improve users’ trading efficiency – users can automate trades, build integrations and create trading apps using ActivTrades’ market-leading CFD and spread betting technology. Exceptional trading infrastructure is available on ActivTrader and MetaTrader 4 and 5. ActivTrades invests deeply in specially developed educational materials for its clients – including webinars, regular outlooks, manuals, etc. Type of offers: ActivTrades focuses on well-developed products in its trading portfolio. Customers can choose from over 1,000 CFD or spread betting instruments across forex, indices, shares, commodities, financials and ETFs. It also offers investing solutions for its institutional partners. Spread betting allows UK residents ONLY to trade the prices of financial instruments, including forex, indices, commodities and LSE shares. Spread betting and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread betting and CFDs work and whether you can afford to take the high risk of losing your money 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
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
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
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
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
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.
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.
Its prime broker services include:
Trading Clearing and execution Custody Reporting Securities trading Margin financing Take up trades Corporate actions Customer service
Interactive Brokers was ranked number one in a 2021 stockbrokers.com review for best commissions and fees. It is a popular choice for those looking for a regular broker as it has a competitive trading platform, a variety of markets to trade in, and no account minimum. However, with such a stable business model, Interactive Brokers is drawing attention from many hedge funds.
Its strength is its securities lending, but other services include:
Equities and fixed income financing OTC clearing Futures and forex Industry insights and analytics
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
Its services include:
Customized client services Industry-leading securities lending Business consulting Risk management and direct market access liquidity tools Global capital introduction Full range of alternative investment services Top-rated independent providers
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 services, such as Goldman Sachs and Morgan Stanley, as the institution needs to meet a minimum account size.
What Services Do Prime Brokers Provide?
Prime broker services are usually tailor-made and customized. However, all brokers offer similar fundamental services, including:
Acquiring new investors – Usually termed as capital introduction services, a broker will set up meetings and deliver presentations to those interested in investing. 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. 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. 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. 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.
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.
How to Choose a Prime Broker
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: 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.