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, I grew up on Wall Street at Smith Barney and PaineWebber, have led all North American Recruiting for Deutsc…

Having worked the prime brokerage market in search for many years, the new normal for bulge bracket primes is $40-50 million in assets, more for lower leverage, possibly less for a recognizable name portfolio manager.

The lions share of income for prime brokerage comes from the float between the broker call rate (what a bank charges a brokerage firm to borrow money against a client portfolio) and the margin rate (even with lower levels for portfolio margin, they still make good money here) as well as with securities lending.

Many people think the securities lending revenue is from the short side of the hedge funds – the borrowed stock that a hedge fund shorts and then buys back at a lower price (hopefully). While an active short account helps revenue, it is really the margined portfolio that creates the securities lending value add – a brokerage firm can rehypothecate 140% of the debit balance of a margin account – in other words, lend securities out from the margined portfolio.

The very nature of prime brokerage is meant to faciliate away trading – business done at multiple brokerage firms but housed at the prime. Trading revenue in the traditional sense tends to be fairly modest versus exotically financed trades using derivatives to maximize portfolio returns.

There are additional revenue streams as well, the ticket charge per transaction (for away business at the least), office space, technology – but the main revenue comes from interest income on margin and margin-related securities lending and derivatives finance.5.8k viewsView 6 Upvoters

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What level of AUM do I need to have a prime brokerage?

Who are the best prime brokers for emerging managers that do not have a minimum AUM requirement?

Whats the maximum amount of leverage a hedge fund can get from a prime broker for a single position?

Which Prime Broker on the street has the best capital introduction for emerging managers?

Why do hedge funds use prime brokers and not cheaper discount brokers?

How much leverage generally does a prime brokerage give to new accounts with 50 to 100 million in assets? Is it less than 1:25?

How much AUM do you need to be a prime broker client for TradeStation or Interactive Brokers?

How is prime brokerage different from regular brokerage margin accounts?

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How much AUM (colllective) does an average Mini Prime (broker) service?

What level of AUM do I need to have a prime brokerage?

Who are the best prime brokers for emerging managers that do not have a minimum AUM requirement?

Whats the maximum amount of leverage a hedge fund can get from a prime broker for a single position?

Which Prime Broker on the street has the best capital introduction for emerging managers?

Why do hedge funds use prime brokers and not cheaper discount brokers?

How much leverage generally does a prime brokerage give to new accounts with 50 to 100 million in assets? Is it less than 1:25?

How much AUM do you need to be a prime broker client for TradeStation or Interactive Brokers?

How is prime brokerage different from regular brokerage margin accounts?

How does Interactive Brokers compare with Goldman Sachs and Credit Suisse as a hedge funds Prime Broker?