Prime brokerage transactions

Hedge Funds & Prime Brokerage Anatomy™ Go Premium The classic margin loan, yesterday The classic stock loan, yesterday The classic long swap, yesterday The classic short swap, yesterday 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 Index: Click ᐅ to expand: Prime Brokerage Securities Financing Investment Strategies Comments? Questions? Suggestions? Requests? Insults? We’d love to 📧 hear from you. Sign up for our newsletter.

The classic prime brokerage transactions, illustrated in the panel:

• Physical long: A physical long position financed with a margin loan.
• Physical short: A physical short position created by selling a stock borrowed under a stock loan.
• Synthetic long: A “synthetic” economic equivalent of a physical long position created by entering a “long” equity derivative as a Floating Amount Payer.
• Synthetic short: A “synthetic” economic equivalent of a physical short position created by entering a “short” equity derivative as a Equity Amount Payer.

The ideas to get your head around are four, and in this order:

Brokerage

The business of getting a broker/dealer, being a regulated person with excellent connections to the market and access to all the best juicy sources of liquidity, to buy or sell shares for you. This is exactly the same idea as when you sell buy or shares through Charles Schwab: all that differs is the scale and volume. You give an order, the broker executes it, hyou are the proud owner of — or no longer the proud owner of — shares in XYZ.

Margin loan

===Short selling

See also

• Prime brokerage charging
• Prime brokerage