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Prime Brokers

  • #1
  • First Post: Apr 30, 2010 11:08am Apr 30, 2010 11:08am
Anyone use a good prime broker that they would recommend? Looking for something low cost with and access to as many markets as possible- equity, fixed income, currency, commodity and derivatives of each.
  • #2
  • May 3, 2010 12:50pm May 3, 2010 12:50pm
Quoting Pearl Jam
Anyone use a good prime broker that they would recommend? Looking for something low cost with and access to as many markets as possible- equity, fixed income, currency, commodity and derivatives of each.
http://www.interactivebrokers.com/ibg/main.php
  • #3
  • May 6, 2010 2:42pm May 6, 2010 2:42pm
Quoting @999
http://www.interactivebrokers.com/ibg/main.php
Thanks, I had my eye on interactive brokers. So you have generally been happy with them?
  • #4
  • May 11, 2010 3:37pm May 11, 2010 3:37pm
Quoting Pearl Jam
Thanks, I had my eye on interactive brokers. So you have generally been happy with them?

I trade equities through IB and have little to complain about. Pricing is good and execution is solid. I have traded their FX Trader before and found the following:

1) the platform isn't as "user friendly" as other FX firms
2) they are pretty expensive- this may be different if you're trading large volumes through your PB relationship.
  • #5
  • May 11, 2010 6:45pm May 11, 2010 6:45pm
Quoting Europipster
2) they are pretty expensive
Relative to who?
  • #6
  • May 11, 2010 7:01pm May 11, 2010 7:01pm
The word "Prime Broker" & "expensive" in the same sentence is an oxymoron. When you get to the level of acct to where you need a Prime Broker, expect to pay out the fees and/or have to balance to command respect from the PB.
  • #7
  • Edited 8:33pm May 11, 2010 8:21pm | Edited 8:33pm
IB a prime brokerage??

JP Morgan, Citibank, those are PB's... you need minimum at least 100k to be with a PB... Citibank I beleive is 100k, JP morgan is like 300-500k, not exactly sure about those numbers, but somewhere around there. We are talking hedge funds and such.

Things are different and much better when you reach that level. You are not going to get 100:1 leverage anymore, 5:1, 10:1... not 100:1, but with the money you will have, you don't need it. You have the prime brokerage stream quotes thru (for example) a CNX platform quoting prices from other PB's (milti-banks). So it's almost like the "broker" is cut out of the equation (If I am not mistaken). The bank still takes a fee (like commission) but it's not too much.
  • #8
  • May 12, 2010 2:28am May 12, 2010 2:28am
Quoting Monroe
JP Morgan, Citibank, those are PB's... you need minimum at least 100k to be with a PB... Citibank I beleive is 100k, JP morgan is like 300-500k,
You are not going to get 100:1 leverage anymore, 5:1, 10:1... not 100:1,
The bank still takes a fee (like commission) but it's not too much.
The leverage is 25:1 with the PB!
min.deposit maybe 500k, but it is hard for an individual to open account with PB, they only do business with corporation!
if per trade size below 2m, the retail ecn broker maybe the best choice（best spread）.
if per trade size above 5m, the PB（EBS) maybe better options.
right now i recommend LCG(currenex) or IB as retail ecn broker.
Does anyone here has experience with PB or EBS ?
ps: currenex is better than EBS according some broker saying.
  • #9
  • May 12, 2010 2:43am May 12, 2010 2:43am
Quoting good mind
ps: currenex is better than EBS according some broker saying.
Oh much better, for the brokers - spread padding, last look, a better commission share. Not nearly as much leeway for them on EBS.
  • #10
  • May 12, 2010 5:29am May 12, 2010 5:29am
I always wondered about one thing about prime brokerage
We all know what bucketshop is but is there possibility that you would
actually face the same if not worst bucketshop with prime brokerages?
Because you could be trading against them if you are hitting theirs bid ask and making profit.
  • #11
  • May 12, 2010 6:20am May 12, 2010 6:20am
Quoting xy100
I always wondered about one thing about prime brokerage
We all know what bucketshop is but is there possibility that you would
actually face the same if not worst bucketshop with prime brokerages?
Because you could be trading against them if you are hitting theirs bid ask and making profit.
Technically PB are suppose to connect a company/trader directly to market and handle misc. It was found recently that Goldman Sach has been playing market makers with a lot of their clients (sort of the same way bucketshops work).
  • #12
  • May 12, 2010 8:39am May 12, 2010 8:39am
good mind... you may be correct with the 25:1... but I think it depends on the prime broker. I have heard some give less than that, However, you are correct, it is more of a corperate thing, like I said for hedge funds and such.

I second your recommendation for LCG, that is the best ECN I know of with the best spreads and commissions you can find. 25k startup.
  • #13
  • May 13, 2010 4:36pm May 13, 2010 4:36pm
Quoting Jhig
The word "Prime Broker" & "expensive" in the same sentence is an oxymoron. When you get to the level of acct to where you need a Prime Broker, expect to pay out the fees and/or have to balance to command respect from the PB.

I wasn't suggesting IB would be expensive as a PB...I do not have a large enough account to even know the terms...I'm saying as an individual trading small sizes- usually 20-50k a clip, $2.50 commission per side is high in my opinion.
  • #14
  • May 13, 2010 8:09pm May 13, 2010 8:09pm
Quoting Jhig
Technically PB are suppose to connect a company/trader directly to market and handle misc. It was found recently that Goldman Sach has been playing market makers with a lot of their clients (sort of the same way bucketshops work).


You sir, have no idea what a prime broker is or what it does.

In an OTC market there is no central exchange guaranteeing performance of counterparties. So if the person on the other side of your trade goes bankrupt before the contract is due for delivery, you will not receive the securities you agreed to purchase. This represents a substantial risk for market makers and other financial market participants (banks). As a byproduct, these banks need to be sure they are only transacting with entities that are creditworthy.

The problem here is that it's very costly and time intensive to determine a counterparties underlying credit worthiness. To offset these substantial costs, banks limit their counterparties to organizations from which they can fairly easily gain audited financial information. ie- publicly traded companies or other regulated entities.

As an individual trader you have zero chance of ever getting a direct counterparty agreement with one of these banks. And this is where a prime broker steps in.

Prime brokers are entities who enter into counterparty agreements with the banks and then allow smaller traders/hedge funds/etc to piggyback on their credit ratings. Your prime broker is assuming all the risk that "you" as a trader will deliver as promised. The margin you keep with the prime broker should (in theory) offset this risk and everyone is happy.

So to make a long story short, the function of a prime broker is to provide access to counterparties you couldn't otherwise trade with.

Now, if you out shopping for a prime broker, the number one question you need to ask is "who are the counterparties?" The answer to that question is going to wind up in the prime brokerage agreement, so before you start trading you know who your dealing with. If the only counterparty is the prime broker (or they won't tell you who the counterparties are. ie:fxcm-pro) then you know your dealing with a bucketshop. If you’re prime broker isn't listed as a counterparty and they wind up on a trade ticket, their in breach of the brokerage agreement.

No broker is going to take that risk (especially Goldman), so if you don't want your PB as a counterparty, just make sure your counterparties are defined in the agreement.
  • #15
  • May 13, 2010 8:22pm May 13, 2010 8:22pm
I am not sure about this, but would like to know, I was under the impression that you needed a PB to trade with fxcm-pro? I know the liquidity on fxcm-pro is huge.
  • #16
  • May 13, 2010 8:23pm May 13, 2010 8:23pm
I never knew what exactly a "prime" broker, was until the above post. makes sense.
  • #17
  • May 13, 2010 9:26pm May 13, 2010 9:26pm
Quoting Europipster
I'm saying as an individual trading small sizes- usually 20-50k a clip, $2.50 commission per side is high in my opinion.
I ask yet again, "$2.50 commission per side is high" relative to who?
  • #18
  • May 17, 2010 4:48pm May 17, 2010 4:48pm
Quoting Trader KGB
I ask yet again, "$2.50 commission per side is high" relative to who?

$2.50 per side on a 20k EUR/USD trade significantly increases the cost to trade...effectively increasing the spread 1.25 pips.
  • #19
  • Jun 14, 2012 4:52am Jun 14, 2012 4:52am
Quoting Monroe
IB a prime brokerage??

JP Morgan, Citibank, those are PB's... you need minimum at least 100k to be with a PB... Citibank I beleive is 100k, JP morgan is like 300-500k, not exactly sure about those numbers, but somewhere around there. We are talking hedge funds and such.

Things are different and much better when you reach that level. You are not going to get 100:1 leverage anymore, 5:1, 10:1... not 100:1, but with the money you will have, you don't need it. You have the prime brokerage stream quotes thru (for example) a CNX platform quoting...
Citibank is actually only £7,500, although it won't get you far they will let you open an account.
  • #20
  • Jun 14, 2012 12:54pm Jun 14, 2012 12:54pm
Quoting espen
Citibank is actually only £7,500, although it won't get you far they will let you open an account.
CitiFX is that...

Citibank as a PB is more.

They aren't the same.
FXGears.com
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