Prime Brokerage Biz Up For Grabs

What the easiest way to make money on Wall Street?

1) Short shares of the publicly-traded parent of your prime broker

2) Spread rumors

3) Move your account to a competitor

4) Tell your friends you pulled the money

5) Cover your short

In all seriousness, the prime brokerage landscape is due for a shakeup similar to the late 1990’s when Furman Selz began to lose market share to Montgomery Securities and the bulge brackets. Will Citadel enter the business? What about Bank of America’s sale of their unit?

Maybe Jamie Dimon should pick up Bank of America’s prime broker for a song, lock in the best of the bunch while Bear’s corpse is still warm, and then make a push to court people who have been leaned on by Goldman and Morgan Stanley during the crisis.

Their is an opportunity here, particularly with relationships between prime brokers and their customers becoming as strained as the counterparty relationships between the brokers.

It will be interesting to see how the list below settles out.

Who Has the Top Prime Brokerage Assets?
Bespoke Investment Group

Update: March 26th

Merrill Lynch’s prime brokerage is booming, and the current market turmoil hasn’t dimmed its prospects, a top executive said.

The firm boosted the number of its prime brokerage clients by 50% over the past year, managing director Jeff Penney told Bloomberg News. The firm has focused on multi-strategy hedge funds—whose numbers have doubled in the past five years—and on hedge funds looking to work with more than one prime broker.

The growth at the third-largest prime brokerage pushed revenue and assets at the unit up 50% in the past year, as well, while Merrill has increased prime brokerage staffing by 20%.

Penney said the firm stands to profit from the collapse of Bear Stearns, with some 20 hedge funds calling with inquiries within three days.

Merrill Prime Brokerage Boosts Clients, Revenue By 50%
Fin Alternatives

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