May 2015

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What should prime brokers do about their hedge fund clients and balance sheet utilization? This has been a recurring theme for the last several years and is a highlight of most industry conversations on hedge fund leverage. The answers so far have been to limit hedge fund access to financing, to part ways with less profitable clients and to grow Delta One/synthetic financing businesses that can be cleared on an exchange.

This Finadium report looks at a newly emerging conversation in prime brokerage on the Target Operating Model for financing. We evaluate the historical prime brokerage financing model in relation to new regulations, segmentation in prime brokerage and what a securities financing exchange may look like compared to existing market models. Our findings are the result of recent conversations with prime brokers, hedge funds and service providers. The report also benefits from conversations at recent Finadium conferences and panels.

This report is part of the Finadium Executive Briefing series, providing briefings and analysis to the financial markets industry.

This report is 19 pages with 8 exhibits.

■ Executive Summary

■ How Prime Brokerage Has Changed
– Market Sizing and Leverage Trends

■ Segmentation in the Prime Brokerage Market

■ The Case for a Securities Finance Exchange
– Existing vs. Preferred Market Models

■ About the Author

■ About Finadium


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