Hedge funds demands up the pressure on derivatives prime brokers

With increased regulatory pressures on hedge funds, the focus is on derivatives prime brokers to provide efficiencies and meet increasing demands. 

Derivatives prime brokers are feeling increased pressure from clients to increase their services, as hedge funds pursue strategies targeting multiple asset classes.

According to The TRADE Derivatives 2016 Derivatives Prime Brokerage Survey, which surveyed over 1600 hedge fund respondents, around half of respondents make use of derivatives prime broker services.

These services include margining and financing, securities lending, clearing and reporting.

The survey also showed that hedge funds using derivatives prime brokers utilise options and equity swaps trading more than hedge funds that use FX and fixed income prime brokers. Around 80% of hedge funds using derivatives services for their options trading.

In addition, hedge funds that use futures also use derivatives services from their prime brokers, with around 50% of respondents using their prime broker for futures clearing.

The results from the survey showed that hedge funds using fewer brokers are less satisfied with overall performance of their providers than those that use four or more. Around 40% of hedge funds use four or more derivatives prime brokers.

Scores for providers were lower for derivatives users than results from a year ago, specifically around margining and financing, and securities lending.  This is especially noteworthy considering that competiveness of financing rates was ranked as the top priority for hedge funds using derivatives prime brokers.

The survey analyses the top ten derivatives prime brokers and provides scores for each provider on key service areas. Click here to download the full survey results