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{{anat|PB|}}''This article is largely about equity [[prime brokerage]], because that’s mainly what the [[JC]] knows about.'' <br> | {{anat|PB|}}''This article is largely about equity [[prime brokerage]], because that’s mainly what the [[JC]] knows about. Those wanting to know more about l’affaire [[Archegos]]'' can go that article, but here — and the sister article on synthetic prime brokerage]], might be a usefukl backgrounder, though to be honest the [[Archegos]] thing, and the {{plainlink|https://www.credit-suisse.com/about-us/en/reports-research/archegos-info-kit.html|Credit Suisse management report into it}}, is a pretty neat backgrounder all by itself.<br> | ||
[[Prime brokerage]] is, first and foremost, a ''financing'' business. A [[prime broker]] [[margin loan|lends money on margin]] to [[hedge fund]]s so they can invest in the market. It can do this directly, by making cash or stock loans, or “[[Synthetic equity swaps|synthetically]]”, using swaps, but either way the PB does not have any market risk on its client’s positions. It makes its money through commissions and optimising its [[cost of funding]]. | [[Prime brokerage]] is, first and foremost, a ''financing'' business. A [[prime broker]] [[margin loan|lends money on margin]] to [[hedge fund]]s so they can invest in the market. It can do this directly, by making cash or stock loans, or “[[Synthetic equity swaps|synthetically]]”, using swaps, but either way the PB does not have any market risk on its client’s positions. It makes its money through commissions and optimising its [[cost of funding]]. | ||
Many [[legal eagles]] who really should know better don’t understand this, and it makes for lengthy and pointless negotiations. | Many [[legal eagles]] who really should know better don’t understand this, and it makes for lengthy and pointless negotiations. | ||
===Why “prime”?=== | |||
No idea. Just one of those mysteries of the law, like why all English lawyers hate the [[Contracts (Rights of Third Parties) Act 1999]], and why people insist on [[counterparts]] clauses. | |||
Okay, let’s guess: Wikipedia says the term, and concept, dates back to the New York broker Furman Selz which offered a centralised service for money managers in the seventies, the idea being to centralise your back office functions and trade flow into a single place — a “prime” broker, we suppose. But it is a guess. These days large hedge funds have multiple prime brokers ([[Archegos]] had seven!!) so the adjective has lost some of its cachet. | |||
===What prime brokers do=== | ===What prime brokers do=== | ||