A new report from the TABB Group shows that prime brokerage, long thought to be the most opaque of markets, is in the midst of a large-scale change.
The report, “Equity Prime Brokerage: Exploring Uncharted Territory,” is the result of several months of conversations with prime services providers and independent financial analytics firms, including data from S3 Partners.
The document finds that Basel III is changing the way the buy side looks at the treatment of financing and collateral. The report says that collateral and financing must be analysed and structured to the same level as trading costs.
In the conclusion of the report, author Radi Khasawneh urges financial institutions to view holistically their trading and financing costs including financing rates, the use of collateral, clearing choices, and analytics, to be the most effective capital, balance sheet and regulatory partner possible.
“Complacency would be a mistake,” Khasawneh writes. “The onus of managing your own financing and risks is more important than ever given the extreme restrictions on bank resources and overhaul of existing business models.”
S3 Founder and Managing Partner Robert Sloan believes that regulatory capital hurdles will only increase and will put increasing information pressure on asset managers. The need to save time and build capital-efficient relationships is a pain point that S3’s BLACKLIGHT solves.
“The Tabb Group’s independent analysis highlights our mutual belief that the right technology can solve the issues related to regulatory costs and create time for its users,” says Sloan.
