As prime brokers and their clients wrestle with the
challenges posed by stricter
capital requirements, derivatives play a growing role in
facilitating investment strategies using less capital. As such
the provision of prime broker
services covering derivatives has become an integral
part of provider capabilities.
Some brokers, such as Societe
Generale, specialised in these
services for some time and are
now seeking to capitalise on
their experience. Others are
adding capacity and expertise,
whether related to trading or
reporting and integrating this
into broader prime broker
services. The outcome is both
greater interest among clients
and more focus from providers. In such an environment,
an analysis of survey results
can help inform users and providers alike.
Overall around 50% of all
respondents make use of deriv-
atives prime broker services I m a g e :
iS
t
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k
Methodology
The analysis is based on the Prime Broker
Survey input received by Global Custodian,
an affiliated publication of The Trade.
Survey respondents were asked to provide a
rating for each prime broker on a numerical
scale from “1” (very weak) to “ 7” (excellent),
covering 10 separate functional service
areas and 46 individual questions. In
general “ 5” (good) is the ‘default’ low score
of respondents. In total over 20 providers
received responses reflecting provision of
derivatives prime broker services, and the
top eight brokers each obtained dozens of
responses yielding thousands of data points
for analysis. The evaluations from all
relevant respondents have been used to a
greater or lesser extent in compiling the
provider profiles and Survey Overview.
Each evaluation was weighted according to
three characteristics of each respondent;
the value of assets under management; the
level of complexity of their business based
on the different strategies used; and the
number of different prime brokers being
used. The scores received in respect of
each of the 10 functional service areas
were further weighted according to the
importance attached to them and the
questions they incorporate, by respondents
to the Survey. The aim is to ensure that in
assessing service provision the greatest
impact results from the scores received
from the most sophisticated users in the
areas they regard as most important. The
four most important service areas form the
core of commentary in the Survey.
Finally it should be noted that as in
previous years a handful of responses are
offered by affiliated entities of providers.
These are ignored completely and do not
count towards the scores.
Part of the package?
Capital considerations bring
derivatives prime brokerage back
into focus
