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Goldman Sachs Prime Brokerage Agreement

The majority of first brokerage clients are made up of large and large investors and institutions. Money managers and hedge funds often fulfill qualifications, as well as arbitragers and a large number of other professional investors. In the case of hedge funds, quality brokerage services are often seen as important to the success of a fund. But what is a first-class broker? I hear you say it. I`m glad you asked me that question. Here`s the answer. The 2007-08 financial crisis led to significant changes in the first-class brokerage services market as many brokers and banks were restructured and clients, concerned about their credit risk for their major brokers, attempted to diversify their counterparty commitment away from their historical relationships as single or double premium brokers. Because of this intensity and strings, the standard online brokerage account, which is sufficient for us, the investing public, will not reduce it for an institution. Instead, these clients need a first-class brokerage agreement to ensure the wide range of financial services they need. With the quantity and depth of first-class brokerage services, there are not many companies that can offer them.

They are mostly the domain of the big investment banks. Restructuring transactions in 2008 included the acquisition of Bear Stearns in JP Morgan, Barclays` acquisition of Lehman Brothers` U.S. assets, Bank of America`s acquisition of Merrill Lynch, and Nomura`s acquisition of certain Lehman Brothers assets in Europe and Asia. The diversification of counterparties has seen the largest flows of client assets from Morgan Stanley and Goldman Sachs (the two companies that have played the biggest role in the business in the past and were therefore the most engaged in the diversification process) and the companies considered the most creditworthy at the time. The banks that recorded the most were Credit Suisse, JP Morgan and Deutsche Bank. During these market changes, HSBC launched a first-rate brokerage business called HSBC Prime Services in 2009, which built its first-rate brokerage platform out of the deposit business. The basic services offered by a premium broker give a money manager the opportunity to trade with several brokerages, while on a centralized master account, he maintains all the hedge fund`s cash and securities in a centralized master account with his first broker. In addition, the leading broker offers equity credit services, portfolio reports, consolidated cash management and other services. In principle, the advent of the first broker freed the fund manager from the longer and more expensive aspects of operating the fund. These services worked because they also allowed the money manager to maintain relationships with several brokerages for IPO assignments, research, best execution, conference access and other products. The premium broker benefits by paying fees (“spreads”) for financing long and short cash and client security positions and, in some cases, by collecting clearing fees and other services. It also earns money by taking the margin portfolios of currently operating hedge funds rehypothecating and interest on securities and other investments.

[1] Prime Brokerage Services focuses on facilitating the multiple and active business operations of large financial institutions such as hedge funds.

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