Briefing: Interest Rates and Revenues for Custodians and Prime Brokers

Finadium Briefing

Interest Rates and Revenues for Custodians and Prime Brokers

Finadium
August 2010

Finadium reports are distributed primarily by subscription. If you are a research subscriber, please log in to download a copy of this report. Otherwise, please contact us at info@finadium.com.

This briefing outlines key variables for custodians and prime brokers to assess when looking at how interest rate changes may affect their businesses. While the timeline of actual changes to interest rates remains a matter of intense speculation worldwide, it is all but certain that they will eventually rise. This will lead to changes in client behavior that will in turn impact revenues.

Higher interest rates will affect multiple service channels, including foreign exchange trading, client financing and asset/liability mismatch programs. While some firms have already begun to model how changes in interest rates will impact their bottom lines, the array of inputs to consider including institutional and retail investment activity remains vast. This briefing provides an overview of particular revenue scenarios in a changing rate environment and offers ideas for further consideration.

This briefing should be read by custodians, prime brokers and their technology and service providers.

This briefing is 12 pages with 6 exhibits.

TABLE OF CONTENTS
■ Executive Summary

■ Interest Rates, Inflation and Volatile Markets

■ Central Banks and the End of Crisis Management

■ Considerations for Custodians and Prime Brokers

■ About the Authors

■ About Finadium