Stephen Swindon Head of Hedge Fund Practice, Rule Financial
Stephen Swindon Head of Hedge Fund Practice, Rule Financial

The Evolution of Prime Brokerage in Foreign Exchange

Stephen Swindon looks at how prime brokers are increasingly looking for ways to take a bigger share of the market and differentiate their offerings.

First Published: e-Forex Magazine 26 / FOCUS / January, 2007

As foreign exchange (FX) establishes itself as an asset class of choice among hedge funds, prime brokers are increasingly looking for ways to take a bigger share of the market and differentiate their offerings.Since its birth at the tail end of the last century, Foreign Exchange Prime Brokerage (FXPB) has quickly gained momentum. Its growth has been driven by the ever increasing number of hedge funds trading FX through prime brokers. While FX has always been used as a hedging mechanism, it is now considered to be a primary investment model rather than a support mechanism.In its simplest format, FXPB is a front-end arrangement providing hedge funds with access to exchanges and execution services. Prime brokerage relationships allow hedge funds to gain access to new counterparties and large funds despite an often limited credit or high risk history. The prime broker streamlines the credit and documentation process, easily enabling hedge funds to access pricing and liquidity from a number of dealers. The FXPB...continued

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