What is Prime Brokerage?

A prime brokerage is an intermediary fund-based service company that provides services in accessing resources for profit-oriented clients. It is a traditional version of online trading that significantly increasing up to this day. The company’s taking the role like mortgage broker more or less. The difference is that it handles higher and bigger requests from higher clients. They usually spread their wings around hedge fund investors, which target wealth management firms or investment banks as their funding sources. To put it simply, prime brokerage assists clients with more complex grant needs than any other mediatory brokers.

Prime Brokerage Definition

As a matter of fact, the term prime brokerage refers to assists large investors. It further developed since 1980s to 1990s. Back then, it was portfolio management which strongly impacted the work of prime brokerage. The improvement of business and financial market broadens the range of prime brokerage definition. As of today, they are globally known as hedge fund assisters who manage stocks and client’s money while being entrusted with the client’s own assets.

What does a Prime Brokerage do? Example


1. Strengthens Backflow

Larger hedge funds as clients need to be equipped with larger resources. These resources are called extra money, and available in the forms of cash, stocks, or assets. A prime brokerage will be forged with a part of the client’s cash, in order to be able to look up for additional stocks. This can later be sold in the market stock, even though the investor does not own them directly. Thus, it’s amplifying the backflow for both the funding party and the broker themselves.

2. Locate New Investors

This service is known by the term of capital introduction services, where they meet any valuable and potential investors and presenting a powerful presentation to them. It is considered a success if the investor candidate agrees to further funding the clients with whatever they need. High chances of success will be delivered if the broker turns it into a win-win situation for both the funder and the client.

3. Maintaining Strong Connections and Research

The brokerage services need to build strong connections in the financial market stores. This can be done by simply collecting new information through deep research and development, at the same time increasing their personal skills. Basically, the more information the broker has, the stronger connection they get. The stronger the connection is, the higher the chance of successful agreement they will make.

Also read "What is Power Broker? Definition and Example"