Parkys quick take: 11 June 2024 NatWest Corporates and Institutions

The FX market is witnessing a transformative phase in terms of liquidity and technology. Scandals and potential regulatory oversight in the FX spot market have increased the focus on transaction cost analysis (TCA) and other measurement tools. Mega-platforms are merging trading technology with various execution methods, while global exchanges are expanding into spot FX. Mr Waterworth believes that cherry-picking of clients is simply a consequence of this, and one that is perhaps driving smaller investors to non-traditional and niche prime brokers, or ‘mini-prime’ providers that are not taking the full, multi-asset approach. He believes the biggest casualties of the retrenchment of prime brokers from the wholesale market in the past 12 to 18 months have been institutions using white-labelled services from the larger prime brokers.

We participated in the initial launch of interest rate swaps and credit default swaps clearing for clients in December 2009 and will fully support client clearing in these products as the markets continue to evolve and expand. To support customer clearing for derivatives that were previously done bilaterally, Goldman Sachs has created Derivatives Clearing Services (DCS). The DCS team is aligned with and was built out of our globally recognized Prime Brokerage and Futures clearing business to maximize efficiency and provide consolidated reporting across asset classes. Liquid’s platform eliminates those restrictions by providing connectivity to all prime brokers. It also tries to make it simple for hedge funds to manage different strategies and different fund structures, while leveraging any prime broker or execution channel in a way that was not possible before, at a significantly lower cost. As the biggest listed derivatives house, Newedge knows centrally cleared technology well and, in a sense, the FX market is coming towards Newedge.

A wholly new approach to the provision of prime brokerage has come from Liquid Holdings Group, a cloud technology and services company for alternative asset managers. It provides fund managers the independence and autonomy to park assets with multiple prime brokers. As a leading Foreign Exchange Prime Broker (FXPB), BNP Paribas serves a diversified institutional client base, including multi-strategy and macro hedge funds, asset managers, banks, large non-bank liquidity providers and agency brokers across regions. Our long established, award-winning, robust platform has an extensive product and currency coverage, including precious metals. Our integrated Prime Brokerage and Clearing platform underpins the strength of our cross-margining offering. We are one of only a few banks globally that offers the full suite of trading, financing, clearing and custody, in partnership with BNP Paribas Securities Services.

In summary, “prime brokerage” is used to describe the specialized suite of services that are provided to the most sophisticated and financially sound institutional clients. We provide our clients with numerous options for electronic execution via many industry trading platforms, including REDIPlus. In addition to electronic execution platforms, Goldman Sachs provides integrated solutions with a broad selection of ISV and OMS platforms as well as connectivity to client-developed software. We also offer clients access to advanced and customizable trading strategies through our futures algorithm suite. The consolidation of the FX Prime Brokerage (FXPB) industry, as highlighted by experts like Richard Elston and Nabil Rahman, is significantly reshaping the landscape of prime brokerage services.

Views expressed herein are not intended to be and should not be viewed as advice or as a personal recommendation. The views expressed herein may not be objective or independent of the interests of the authors or other NatWest Markets trading desks, who may be active participants in the markets, investments or strategies referred to in this article. You should make your own independent evaluation of the relevance and adequacy of the information contained in this article and any issues that are of concern to you.

Our agency-only futures desk has extensive experience executing futures and options on futures. Our presence in New York, Chicago, San Francisco, London, Hong Kong, Sydney and Tokyo ensures that our clients receive a global perspective and 24-hour coverage. Our voice execution desk helps clients navigate today’s volatile markets by providing market insight and analysis of trade flows across asset classes. By linking to the big banks, the retail broker is able to access live price quotes from the major banks which they then offer, after widening the spread, to their clients.

They also charge different rates depending on the volume of transactions a client does, the number of services a client uses, and so on. The majority of these individuals are traders, researchers, and a few administrative people. The fund has limited resources that it can allocate to the various needs that are required of the business. This article has been prepared for information purposes only, does not constitute an analysis of all potentially material issues and is subject to change at any time without prior notice.

Forex prime brokerage services are typically offered to institutional clients such as hedge fund managers, asset managers and retail FX brokers, who have complex FX trading needs. By partnering with a forex prime broker, these clients can access a range of services and resources that would not be available to them individually, therefore benefiting from the broker’s expertise and relationships in the forex market. As a result, the growth in the market is coming from a new breed of prime of primes and, in some cases, providers looking to reinvent the traditional FX prime brokerage model.

Some go as far as to offer the opportunity to sublease office space and provide access to other facility-based benefits. As with more traditional offerings, participation in any of the concierge services is optional. The assigned broker, or brokers, may provide settlement agent services along with financing for leverage. Custody of assets may be offered, as well as daily preparations of account statements. Establishing an interbank market access is the first step towards setting up a Forex brokerage firm that can serve retail traders.

It will also lay out all the terms, including fees, minimum account requirements, minimum transaction levels, and any other details needed between the two entities. After six months, ABC has grown and its investment strategy has become more complex. It needs to borrow securities as part of its investment strategy and transacts with J.P.

Everything that you would expect from a modern prime brokerage trading platform. Trade futures, options, equities, and currency around the globe from a desktop computer, web interface, or on your mobile phone. EMIR Refit, amending EMIR, requires clearing firms to offer and provide OTC clearing services to in-scope clients in the European Union (EU) under terms that are fair, reasonable, non-discriminatory and transparent (principles known as FRANDT). The conditions under which terms are considered FRANDT, are specified in more detail in the FRANDT Delegated Regulation. Our client service professionals act as a central point of contact, working with legal, compliance, risk, operations and technology to execute long- and short-term strategies. They engage with corporate action as well as trade and cash-management personnel, ensuring that every client’s business is fully supported.

Banks are now required to maintain a CET1 (Common Equity Tier 1 ratio) of 4.5%. To satisfy the rules, banks have tightened the leverage offered to retail Forex companies. As mentioned by Richard Elston, the multi-asset approach Prime Of Prime Pop is gaining traction. Non-bank PBs are well-placed to provide these multi-asset services, which are becoming a necessity for hedge funds looking to manage their investments more efficiently across various asset classes.

• Peter Plester, head of FX prime brokerage, who recently joined Saxo Bank from Rabobank, says the decision was made to enter the market because it had evolved and the days of a single liquidity provider have gone.
• The risks are that the labour market figures show a further reduction in employment demand, albeit caveated with risks of an increase in average earnings growth because of the National Living Wage, introduced in April.
• Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments involve leverage.
• In many corners of finance there’s a tendency to stick with what you know, but this report proves that a shake-up can ultimately deliver a better outcome and it’s something we see first-hand when onboarding new institutional clients, too.

Because of the scale of the investing and the approach, the needs of hedge funds differ from those of the average individual investor. As a result, prime brokerages do more than simply help hedge funds execute trades. BNP Paribas’ best-in-class Cash Equities platform offers award-winning equity research and a premier, customisable execution experience. BNP Paribas Exane research is renowned for its depth and quality, reinforced by experienced, top-ranked sales and specialist teams as well as a dedicated corporate access service. This, combined with our market-leading global execution services including Cortex Equities, a state-of-the-art electronic trading platform, high-touch trading, portfolio trading, quant research and execution consulting deliver an unparalleled Cash Equities offering. These can include risk management, capital introduction, securities financing, and cash financing.

What’s more, prime brokers can use the collateral from clients for their own investments. This is known as “rehypothecation.” In many cases, the fund partners permit their collateral to be used this way in exchange for a reduction in fees. BNP Paribas has a leading Delta One solutions platform that provides clients with global market access in both developed and emerging markets. We offer competitive financing and execution across Delta One beta products, including indices, sectors, ETFs and custom baskets. Our dedicated Delta One specialists, structuring and strategy teams offer a range of bespoke products and strategies to fit a variety of clients’ needs. A broker is an individual or entity that facilitates the purchase or sale of securities, such as the buying or selling of stocks and bonds for an investment account.