Using Prime Brokers

This is a discussion on Using Prime Brokers within the Brokerages forums, part of the Commercial category; I'm posting in this forum as it seems the most suitable. I have a few things I'm wondering about regarding ...

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Old Dec 17, 2008, 2:42pm   #1
Joined Feb 2008
Using Prime Brokers

I'm posting in this forum as it seems the most suitable.

I have a few things I'm wondering about regarding using a prime broker. I see IB also has Prime Services, so maybe it would be possible to combine trading with them and another broker. Amongst others, I have an IB-acct. However, that leaves me wondering:

1. Would another Prime Broker (whomever, really) receive updated margin status as to trades that are offset at the Prime Broker they give up the trade to? Leaving me free to go long again and again with #2 and then selling at #1?

2. In addition to negotiating the normal commission, is there usually any give-up costs related to doing this? Or keeping the account?

TIA and yes, I guess I should (and probably will) talk to a PB directly - but, hey: It's for that great big knowledge base called the Internet as well.
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Old Dec 17, 2008, 3:14pm   #2
Joined Sep 2004
Yes PBs charge a fee on top of any access fees you may be charged for trading wherever you're trading. Otherwise they would be doing the work for free.

Whether you are even suitable material for a PB type relationship will depend in no small part on what type of trader you are, account size etc.

Plus remember, the rationale for why PBs charge you is that they are performing an administrative service (i.e. largely processing your trades and keeping track of the concomitant fluctuations in your account). Ergo, their revenue is transaction based and you will most likely find that your fee structure is transaction based too (or, maybe has a transaction component to it at least).

As it is not that much more arduous (if at all) to process a trade wirth fifty million bucks than it is to process a trade worth fifty thousand, you may well find that if the ticket cost for both is the same (which it is at many PBs) then sheer lack of economies of scale will make it financially crippling to clear through a PB.

So in short, yes, you very much do need to have that conversation with them to find out if you are even in the same ballpark. And bear in mind the fact that credit these days is tighter than a gnats chuff so they may not even wanna know....

My best guess is not, but thats based of course on fairly sketchy info (i.e. your one post).

Hope that helps.

"That which doesn't kill me makes me stronger"

Last edited by GammaJammer; Dec 17, 2008 at 3:37pm.
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Old Dec 17, 2008, 3:54pm   #3
Joined Feb 2008
amado started this thread Thanks for that, GammaJammer. Much appreciated. Karma etc

I did however not quite get an answer to whether they share realtime synchronised positions, as in a trade has been netted out and I'm good to go with more margin? I'm assuming yes, of course.
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