Cash prime brokerage

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Hedge Funds & Prime Brokerage Anatomy™

There is no industry standard prime brokerage agreement, so this is not so much an anatomy as a collection of resources about an amorphous subject.
Hedge fund | AIFMD | Depositary | Prime broker | prime brokerage agreement | synthetic prime brokerage | margin lending | custody asset | CASS Anatomy | reuse & rehypothecation | hedge fund | leveraged alpha | greeks | short selling

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Cash prime brokerage describes the traditional margin lending activity of an equity prime broker, where the prime broker lends its clients cash for them to buy shares which the prime broker then holds in custody for the client, or lends its clients shares so they can sell them short and raise cash, which the clients deposit with the prime broker.

In both cases the client takes title to the securities, with all the implications for stamp duty and shareholder reporting that this entails, even though the prime broker, has custodian of the shares has the right to use them (Americans call this “rehypothecation”) to defray their financing costs in the mean time.

Cash prime brokerage is also described as “normal prime brokerage” or “full prime brokerage”, to distinguish it from “synthetic prime brokerage”, which is prime brokerage as described above, only done with derivatives, so the client never gets title to the shares.


See also