Prime brokers play key role in helping hedge funds in trade execution and regulatory compliance
Prime services are evolving as the hedge fund industry faces increasing compliance pressure from regulations in the US and EU. OTC derivatives exchange clearing will also develop service offerings.
The collapse of Lehman Brothers and the bankruptcy of MF Global, announced a year ago, brought issues of counterparty risk and asset protection to the fore for hedge funds. The fallout from MF Global has also highlighted the need for a reassessment of the relationship between hedge funds and their prime broker.
The result has been a much more responsive prime services offering. For example, Goldman Sachs set up a custody service in partnership with BNY Mellon around 18 months ago. The service
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