Which brokers do most of the hedge funds execute their orders through?

[kjsnow25]

hedge funds execute through a variety of brokers, both big and small. If they have one or multiple prime brokerage relationships, they can execute away, and DVP back to their prime broker. This is done for a negotiated per ticket charge, usually. Sometimes you can negotiate that away to zero....

It depends on the style of the fund. Not everyone needs all the services of a prime, so you can also use a broker where you just set up a fully disclosed account, effectively parking money at that broker or wherever that broker is an introducing broker to.

Hedge funds use prime brokers for things other than execution, but the prime does try to control as much of the revenue as possible for the fund and it's trading, be it financing on balances, cap intro, DMA, etc. They all claim to be masters of all, but it's no more really than a land grab.

You can execute wherever you feel you have an advantage, be it for technology, research, or other...

 

[acerbits]

I believe the biggest are pershing, national financial, and Bear Stearns. Most mega funds (500m+) use Bear

 

[hellrider]

most big funds would never use ib.

 

[crgarcia]

Most hedge funds are more concerned about the broker financial situation; they don't want to risk that the broker goes broke (even if it rhymes).

Commissions and order execution are not too important to hedge funds, as they don't day-trade.

 

[Surdo]

Quote from crgarcia:

Commissions and order execution are not too important to hedge funds, as they don't day-trade.

Wrong and wrong again, where did you get this information from?

Hedge funds are very conscious of trading expenses, why should they throw out commission to a desk if they can execute through an ECN for 1/2?

Many funds are in and out of positions daily, and trade around core holdings.


el surdo

 

[NasdaqTrader]

Best broker to use is Churn Em And Burn Em Securities in Brooklyn. Tell Vinny I sent ya. He's got some nice stocks to sell ya with 2 point spreads. Fuggetaboutit!!

 

[Landis82]

Quote from acerbits:

I believe the biggest are pershing, national financial, and Bear Stearns. Most mega funds (500m+) use Bear

For clearing purposes, yes I would agree with your statement.
Bear receives a lot of clearing business.

But as far as PRIME BROKERAGE goes, I would suggest that Deutsche Bank is way up on the list, due mainly from the FACT that they FACILITATE trade via traders on their Equity Derivatives Desk that will make markets on practically anything that moves, and more specifically ETF's.

Not all brokers will make markets for their clients. Deutsche Bank does, and has been doing so for about 10 years now ever since they took over the equity derivative desk from Nat-West, which came from Morgan Stanley.

You want $50 million exposure in the SMH?
They will make you a market, and then undwind their side of the facilitory execution by hedging or by scalping out of the position.

Because of this, DB is literally a big "hedge" fund.

 

[Bogan7]

Quote from acerbits:

I believe the biggest are pershing, national financial, and Bear Stearns. Most mega funds (500m+) use Bear

Man Financial are a massive non prime broker in this market as well. I know I worked on some massive accounts while there.

Cheers

 

[ChiBondKing]

Quote from Landis82:

For clearing purposes, yes I would agree with your statement.
Bear receives a lot of clearing business.

But as far as PRIME BROKERAGE goes, I would suggest that Deutsche Bank is way up on the list, due mainly from the FACT that they FACILITATE trade via traders on their Equity Derivatives Desk that will make markets on practically anything that moves, and more specifically ETF's.

Not all brokers will make markets for their clients. Deutsche Bank does, and has been doing so for about 10 years now ever since they took over the equity derivative desk from Nat-West, which came from Morgan Stanley.

You want $50 million exposure in the SMH?
They will make you a market, and then undwind their side of the facilitory execution by hedging or by scalping out of the position.

Because of this, DB is literally a big "hedge" fund.

don't forget about bear stearns

we did something similar on the eq. derivs desk as well... saw a lot of familiar fund names pop up on the turret sometimes...

 

[cashmoney69]

Why do HF's have to use prime brokers?...why are smaller discount brokers not fit for the job?.