Magazine article Modern Trader

Bigger May Not Be Better

Magazine article Modern Trader

Bigger May Not Be Better

Article excerpt

Matt Simon, analyst at Tabb Group, says that the market share of the top three prime brokers: Goldman Sachs, Morgan Stanley and JP Morgan, has dropped to about 50% vs. 70-80% five years ago. He attributes it to hedge funds seeking diversification due to the exits of Lehman Brothers, Bear Stearns and Merrill Lynch. Turns out bigger may not be better and some new players are looking to get in the game.

For example, TradeStation launched a prime brokerage services division on Sept. 24, in an attempt to fill a void foi small and mid-sized hedge funds and investment advisors. TradeStation Prime Services will provide execution platforms, clearance and settlement of trades and portfolio reporting services.

"Many of the larger prime brokers don't like having smaller funds as clients because they're not profitable," says Simon. "Hedge fund assets have dropped over the last year and there's less business to go around. You have a smaller industry with more players, and because of that, it's going to be challenging for the new entrants. …

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