Interactive Brokers Prime Services

tonyfo's picture
Rank: Chimp | banana points 11

Hi all,

I have been running a families + friends strategy on an IB personal account for a little while now, and have now reached the minimum size ($3m) to take advantage of IB Prime. I am hoping it would serve as a springboard to establish a track record and tap into their marketplace.

IB Prime is said to offer the possibility of doing 2 things: 1) Execute with IB and clear at another venue and 2) Execute elsewhere and clear trades with IB.

I am unfamiliar with these setups (having been exposed to individual accounts solely so far): is there any advantage of executing or clearing away of IB? Would it be any cheaper? And how would one go about doing it (would I need to open accounts with clearing houses or investment banks)?

Thank you,
Tony

Comments (9)

Feb 8, 2019

I think at $3MM it's best you trade and clear at IB, the other solutions are not of much use unless you are clearing a lot of volumes and running off market transactions and other complex strategies.
Best to stick to IB cleared for listed securities.

Feb 8, 2019

you would only look to use those services if had a NEED to use them.

For example, if you wanted to purchase a security that IB does not offer (maybe some exotic structure offered by an investment bank). You would execute that trade with the investment bank (Goldman, Morgan Stanley, etc..) offering the exotic security, but still clear with IB.

Its not about cost (it won't be cheaper until you hit much larger volumes...like over 50mm)...its about access to exotic securities that IB does not offer (multi-trance CDOs, etc...)

just google it...you're welcome

Feb 8, 2019

I see - Korean equities is a good example then.
I am guessing that I will have to go through the onboarding process with every other counterparty as well then?

Feb 8, 2019

I think at $3MM it's best to focus on the most liquid and developed markets first and rather than fall into 'shiny object syndrome' of exotic markets and products.
Rather just build on your existing strong holds and improve them.
Simplify rather than otherwise.

Feb 8, 2019

Thanks again for your thoughts. Your thoughts are interesting even though I am looking for advice on execution vs strategy at this stage.

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Feb 8, 2019

yes, that is correct...if you want to execute/clear with another firm, you must also become a customer of that firm. This will be difficult with assets under 50mm. IB might be willing to clear trades from other dealers...but other dealers might not bother to consider you as a customer unless you have certain AUM / commission generating strategies. Regulatory compliance fees per customer have increased...and smaller hedge funds have a hard time finding dealers who want their business. For this reason, intermediate dealers have been cropping up (mini-primes like convergex for example) that offer their services as a middleman aggregator. I suspect that unless there are securities that you want to trade that IB does not offer, then there is not much advantage to use IB Prime (but maybe you have specific needs they don't satisfy)...although IB frowns on excessive leverage (for example, they require higher margin than almost all other futures and FX brokers)

just google it...you're welcome

Feb 8, 2019

It's is difficult being a micro HF in this age!
I was thinking last night: it would be great if there was an HF starter club of some sort, where all independent managers pool their sub-accounts under one main account, aggregating their AUM to have better and cheaper access to the street.
Does such a buying club exist anywhere?

Feb 8, 2019

These type of solutions where there are several funds under same umbrella so the AUM thresholds get significantly lower and the regulatory part is more relaxed are indeed being offered by several funds. It's mainly done in the Caymans through SPC(Segregated Portfolio Company) Several funds can take you in as an incubator fund. I can introduce you to some.
Also Cowen Prime offers Prime of prime wherein they as an intermediary between the prime and the HF. GS and MS are available at $5MM but with fixed annual commitment for commisions it smooths out the process a lot.
PM me if you'd more personalised advice. I'll help.

Feb 8, 2019
Comment

just google it...you're welcome