FX Prime Brokerage: Risks and Challenges. Global Operations Managers Conference Hosted by the FX Joint Standing Committee April 20-21. Overview: Foreign exchange prime brokerage (FXPB) came to the forefront in the late 1990’s but had limited traction.
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Global Operations Managers Conference
Hosted by the FX Joint Standing Committee
Foreign exchange prime brokerage (FXPB) came to the forefront in the late 1990’s but had limited traction.
Over the last 3 to 4 years, the Industry has seen explosive growth in this business fueled by increased interest in FX as an asset class and the soaring number of new hedge funds.
Entering the FXPB space may be a valuable way for banks to leverage existing infrastructure and investment.
Commodity trading advisors (CTA’s)
Traditional asset managers & regional banks
How it works:
Clients trade with an executing brokers, who then "give-up" their trades to the FXPB for trade processing.
The FXPB acts as a central counterparty to the clients’ transactions:
Holding any collateral required for trading
Extending credit lines
Becoming the central back office for the clientGrowth of FX Prime Brokerage
Trades with a number
of bank counterparties
Execution + PB instructions
Client may out-source operational functions
PB confirms block trade with Broker
Trade given up to PB
Allocations + broker instructions
Prime Broker Operations confirms allocations with Client and/or middle office provider
Manages the operational
support for the client
FX Prime Broker