Future of prime brokerage? Sec lending specifically?

I keep reading that banks are scaling back on PB because of how balance sheet intensive it is. What does that mean for the future, specifically sec lending since it makes so much money for the firm? How do you think PB will adapt to new regulations?

Please respond! Would love to hear any thoughts on this subject from you guys. Thanks again for taking the time.

Comments (8)

May 31, 2015

It all depends on what bank we are discussing. If it's a MM who only dabbled in prime brokerage activities, they may exit entirely. However, most of the large players (bulge brackets) may scale back slightly, but at the end of the day, someone needs to provide the service and they are the giants.

Jun 3, 2015
wilder01:

It all depends on what bank we are discussing. If it's a MM who only dabbled in prime brokerage activities, they may exit entirely. However, most of the large players (bulge brackets) may scale back slightly, but at the end of the day, someone needs to provide the service and they are the giants.

I agree with you Wilder.

David Wilson
Criminal Defense Lawyer Indio
Personal Injury Lawyer Indio
http://cabreralawoffices.com/

Jun 2, 2015

any more comments? bump

Jun 3, 2015

If being on a repo desk is any indication/approximation, PBs will re-evaluate existing client relationships (clients likewise will re-evaluate their PBs). Won't be a massive scaling back now, though the usual reporting date window dressing pressures are evidently growing in some areas. Clients will probably be ranked according to the overall value they add to the business, and if balance sheets continue to die the costs will either be passed on (via wider spreads) or guys will get cut. There are a few smaller shops out there who purport to bring buyers/sellers of collateral together, but they don't have the economies of scale that banks have (most of them are reliant on (other) dealers anyways). If anything, a trading role on a repo desk or a sec lending desk will be very similar to the PB role: it will mainly be about managing the client and the inventory.

Jun 5, 2015

Just a quick question to that. Who would get first? VPs, etc. or analysts?

Learn More

Boost your resume and land a finance job by passing the FINRA SIE. 264 pages & 1981 smart flashcards written by a former 8X top Fidelity instructor. Try it for 0 bananas here.

Jun 5, 2015

also what are exit opps for sec lending?

Aug 11, 2015

It's given birth to a few mini primes who use omnibus structures with the bigger banks. There are funds who are being let go by the bigger banks because they don't meet their minimum fee criteria, they're either being priced out or been given a time to look for another PB provider, they have no solution but to go to the mini primes. The way mini primes work is they omnibus with a big bank i.e Goldmans, Goldman see's the mini prime as one client and the mini prime has all the funds let go by the bigger banks under it.

Aug 13, 2015
Comment