Prime Brokers and Custodians

Complete solution

Expand your addressable market by lowering the minimum viable revenue required for a new client.

Increase trading revenues

Increase trading revenues by offering low-touch, low-cost execution to clients as a standard offering.

Facilitate PB growth

Facilitate PB balance growth by making it easier for clients to trade away while managing settlement risks

Offer clients

Offer clients an integrated trade reporting solution that is virtually equivalent to delegated reporting

Expand your addressable market for Prime by lowering the hurdles for clients to be viable

As the easy pickings for gathering Prime client balances become harder to come by, one possible area of growth comes from smaller, emerging managers. However, taking on small managers is a challenge not least because of the initial cost of onboarding, but also the ongoing costs of maintenance.

As is the case with execution brokers, it theoretically makes sense for a Prime Broker to onboard a small client and supply it with low-touch, low-maintenance execution, thereby converting this small client into a call option with a low cost of carry.

However, incumbent software and connectivity providers effectively impose a tax on Prime Brokers through long contract commitments and minimum order quantities. As with the execution brokers, this high ongoing cost commitment leads to either clients being turned down, or small clients being put on expensive high-touch trading services, ultimately leading to insufficient revenues on the account and the eventual off-boarding of clients - to the dissatisfaction of everyone involved.

We address this unfortunate catch-22 by solving for infrastructure cost for connectivity as well as the delivery of electronic execution. Prometheus EMS, built on our cloud-based routing network, allows Prime Brokers to offer low-touch electronic trading access to clients with short lead times for account activation (upon completion of algo certifications) and no ongoing contract commitments for either connectivity or buy-side trading access.

All contracts are one-month rolling and can be terminated at any time, making the hurdle for taking on a new client and giving them a chance to succeed much lower.

Increase trading revenues by making low-cost execution the norm, not the exception

Like any other good, trading turnover is sensitive to the cost of trading itself. For the execution desks at many Prime Brokers, even though the absolute commission rate of low-touch execution is much lower than high-touch rates, it often comes out in the wash rather than straight through processing of trades placed electronically.

This makes for much better profit margins than high-touch, accounting for cost allocations of salaries, compliance, risk and other support for manual trade bookings and settlements.

The combination of Prometheus and Andromeda allows Prime Brokers to offer as standard an electronic trading offering, giving clients the option to use both low-touch automated execution options (algo, DMA or PT, where offered) and high-touch execution via an execution desk where required - and pay the corresponding commission rate.

Removing the fixed cost of supplying electronic trading connectivity opens the doors to more flow and more optimised resource utilisation: traders can focus on executing complex and special situations for which they are well paid, while smaller, simpler tickets can be handled by low-touch execution.

Facilitate the growth of Prime balances under custody

Prometheus comes with built-in support for trades to be done away from a Prime Broker or custodian, automatically generating trade files with settlement instructions for each custodian for trades marked as done away. Settlement instruction files can be automated to be sent at regular intervals, helping the PB/custodian to have increased visibility on incoming trades done away that are due to be settled, while reducing the risk of trade breaks, delays and penalties by allowing exceptions to be detected early on in the settlement cycle.

Ultimately, this makes it easier for funds to seamlessly execute trades away from the PB/custodian at other executing brokers, which paradoxically makes the PB/custody offering much more attractive due to the flexibility accorded to clients and brings greater balances held in custody by the PB/custodian.

Ultimately, with the bulk of PB revenues coming from financing of balances rather than execution, Prometheus making is easy for a PB to be the final settlement counterparty for funds, directing settlement balances to a single custodian, helps to make operations smoother for clients, and much more profitable for their PB/custodians.

Delegated reporting - without delegated reporting

Regulatory burdens are on the rise for clients, with an increasing incidence of fines being issued for late trade reporting under EMIR and MiFIR.

Delegated reporting is a client's dream, but very few brokers are willing to take on that burden for their clients - the exceptions being some retail brokers that have made a foray into the institutional space.

For most other brokers, offering a delegated service is nice, until the workload starts piling up and is no longer worth the hard-earned but otherwise relatively small revenue for most clients.

The integration of Prometheus EMS and its accompanying reporting suite Artemis allows for the automatic generation of MiFIR trade reports to RTS 22 standard directly from FIX messages. The client will need to undertake an initial set up, but beyond that we are able to automate not only the generation of the report but also the automatic submission of the report to an Authorised Reporting Mechanism (ARM), in this case, primarily LSEG UnaVista.

By integrating Prometheus into your client offering, you effectively offer your Prime clients a reporting solution that requires the same effort on their end as a delegated reporting service: nearly zero, other than dealing with exceptions.

In both cases, the client is ultimately responsible for their reporting. But with Artemis, it feels the same to the client, without the burden on you. That, we believe, is a material competitive edge.

Reporting summary