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Business Knowledge for IT in Prime Brokerage: A Complete Handbook for IT Professionals

Book Description

Prime brokerage is booming .As their hedge fund clients cast their net over a wider geographical area in search of superior returns by opening offices in new territories , prime brokers are forced to broaden their service offerings. At the same time, the battle for talent is intensifying among the top firms. "Business Knowledge for IT in Prime Brokerage" provides the platform for IT professionals to grasp the concepts of prime brokerage from both a business and an IT perspective and to snap up some of plum roles in the prime brokerage arena

Table of Contents

  1. Copyright
  2. Preface
  3. Acknowledgements
  4. Introduction
  5. 1. Overview of Prime Brokerage
    1. Introduction
    2. Definition of Prime Brokerage
    3. History of Prime Brokerage
    4. Risk Management for Hedge Funds
    5. Prime Brokerage Fee Structure
    6. Global Prime Brokerage Market
    7. List of some Prime Brokers
  6. 2. Overview of Hedge Funds
    1. Introduction
    2. What are Hedge Funds?
    3. Definition of Hedge Funds
    4. Key Characteristics of Hedge Funds
    5. Reasons for Investing in Hedge Funds
    6. Types of Hedge Fund Strategies
      1. 1. Relative Value
      2. 2. Event-driven
      3. 3. Long/short Equity
      4. 4. Opportunistic
    7. Fee Structure
      1. Management Fee
      2. Performance Fee
      3. Surrender Fee
      4. Hurdle Fee
    8. World’s 10 Best Hedge Funds
      1. High-water Mark
      2. Lookback Fee
      3. Miscellaneous Fee
    9. Global Hedge Fund Industry
    10. Source of Investments
  7. 3. The Relationship between Prime Brokers and Hedge Funds
    1. Introduction
    2. Role of the Prime Broker
    3. Overview of Products and Services offered by Prime Brokers
      1. Core Services
      2. Ancillary Services
    4. Risk Management for Hedge Funds
    5. What Hedge Funds Want from Prime Brokers
    6. Legal Aspects of the Prime Broker–Hedge Fund Relationship
  8. 4. The Trading and Economic Factors Driving the Relationship
    1. Introduction
    2. The “Relationship” Side of the Trading and Economic Factors
    3. Differences between Prime Brokerage Services
    4. Economics
      1. Trading Equities vs CFDs
      2. Electronic Trading Platforms
      3. Structured Products
      4. Tax-efficient Structures
      5. Dividend Enhancements
      6. Rehypothecation
    5. Prime Brokerage Costs
      1. Single vs Multiple Prime Brokers
    6. Leverage
    7. Intermediation
    8. Conclusion
  9. 5. The Business Environment
    1. Introduction
    2. The Environmental Factors affecting Prime Brokers
      1. Political
      2. MiFID
      3. SOX
      4. Basel II
      5. UCITS III
      6. Economic
      7. Social
      8. Legal
      9. Technological
    3. The Global Custodian Prime Brokerage Survey
    4. Allied Industries
      1. Regulators
      2. Financial Services Authority (FSA)
      3. Bank of England
      4. ECB
      5. Committee of European Securities Regulators
      6. Securities and Exchange Commission (SEC)
      7. Exchanges
      8. London Stock Exchange
      9. NYSE Euronext
      10. NASDAQ
      11. Data Providers
      12. Thomson Reuters
      13. Dow Jones Newswires
      14. Bloomberg L.P.
      15. Financial Times
      16. Central Securities Depositories
      17. Clearstream International SA
      18. Euroclear Bank SA
    5. Security Identifier Types
      1. CUSIP
      2. ISIN
      3. SEDOL
      4. RIC
  10. 6. Trends in Prime Brokerage
    1. Introduction
    2. The Rising Importance of Prime Brokerage as a Banking Business Line
      1. Prime Brokerage by the Numbers
      2. Prime Brokerage offers Fat, Stable Margins
      3. Feeding Customers to Business Units
      4. Competition and Consolidation
    3. Increasing Demand for Prime Brokerage Services in Credit Derivatives Market
      1. What are Credit Derivatives?
      2. Global Market Growth
    4. The Rise of FX Prime Brokerage
    5. Use of FX Prime Brokerage to Implement Currency Overlay
      1. What is Currency Overlay?
    6. Prime Brokers Servicing Traditional Asset Managers
    7. The Emergence of 130/30 Strategies
      1. What is 130/30?
      2. Opportunities for Prime Brokers
    8. The Advent of the Multi-Prime Brokerage Environment
    9. Factors Responsible for the Trend towards using Multiple Prime Brokers
      1. Challenges and Issues
    10. Continued Evolution of Securities Lending Market
    11. Growth of CFD Market
  11. 7. Cross-Asset Prime Brokerage
    1. Introduction
    2. Foreign Exchange
    3. FX Trade Process Flow
      1. Pre-trade Preparation
      2. Trade Execution and Capture
      3. Confirmation
      4. Netting
      5. Settlement
      6. Account Reconciliation
    4. FX Prime Brokerage Deal Process
      1. 1. Notification
      2. 2. Matching and Acceptance or Rejection
      3. 3. Confirmation
      4. 4. Allocation
    5. Evolution of Prime-brokered Trade Execution
    6. Value Proposition
      1. Benefit to the Client
      2. Benefit to the Prime Broker
      3. Benefit to the Executing Dealer
    7. Legal Frameworks and Agreements
      1. Give-up Agreement
      2. Prime Brokerage Agreement
      3. Compensation Agreement
    8. Credit Risk Mitigation
    9. Fixed Income
      1. Introduction
      2. Fixed Income Prime Brokerage
      3. Products Traded
      4. Client–Executing Dealer relations
      5. Block Trade Execution and Sub-account Breakdowns
      6. Timing of Allocations and Settlement Instructions
      7. Client–Prime Broker Relations
      8. Methods of Communication
      9. Trade Information for Sub-accounts
      10. Executing Dealer–Prime Broker Relations
  12. 8. Securities Lending
    1. Introduction
    2. Definition of Securities Lending
    3. History of Securities Lending from 1990s
      1. 1990s
      2. 2000s
    4. Reasons for Borrowing Securities
      1. Arbitrage Trading
      2. Naked Shorting
      3. Settlement Coverage
    5. The Transaction Life Cycle
      1. Trade Execution
    6. Different Types of Securities Lending Transactions
      1. Transaction Structures
      2. Securities loan transactions
      3. Transaction collateralised with assets other than cash
      4. Transaction collateralised with cash
      5. Repurchase agreements
      6. Buy/sell backs and sell/buy backs
    7. Revenue generation from securities lending
    8. Risks
      1. Types and Sources of Risk
      2. Credit risk
      3. Liquidity risk
      4. Market risk
      5. Settlement risk
    9. Settlement Fails
    10. Risk Controls
  13. 9. Common Systems Used in Prime Brokerage
    1. Introduction
    2. The Prime Brokerage Technology Market
    3. Profile of systems
      1. Paladyne Suite of Products
      2. The Paladyne difference
      3. The Paladyne product suite
      4. SunGard
      5. Global One
      6. Key features
      7. Martini
      8. Loanet
      9. Key features
      10. Astec Analytics
      11. Key features
    4. List of other systems
  14. 10. IT Projects
    1. Introduction
    2. Types of IT Projects
      1. Implementing a Multi-Prime Brokerage Environment
      2. Data Aggregation
        1. Hearsay reporting capabilities of the first prime broker
        2. Utilising a fund administrator
        3. Building in-house capabilities
      3. Trade Allocation and Position Maintenance
      4. Methodologies for allocating trades to multiple prime brokers
    3. Case Study
      1. Background
      2. Challenges
      3. Benefits of Implementing the System
    4. Green IT
      1. Introduction
      2. How does this relate to IT?
      3. Business Justification for a Green IT Strategy
      4. Green Facts
    5. Building Blocks to a Green IT Strategy
      1. Baselining Current Environmental Impact
      2. Phase 1 – Analysing energy consumption
        1. 1. Creating a mathematical estimate of energy consumption
        2. 2. Utilising software that manages the PC energy settings at network level
      3. Phase 2 – Cataloguing disposal practices
      4. Phase 3 – Examining acquisition and hardware life cycle
      5. IT Practices that support a Green IT Strategy
        1. PC power management
        2. Network-level PC power management
        3. Extension of the useful life of IT hardware
  15. 11. Commonly Used Terminology
    1. Introduction
    2. List of Terms
  16. 12. The Future
    1. The Future: What does it hold for IT and Business in Prime Brokerage?
    2. Globalisation of Hedge Funds
    3. Increasing Client Demand
    4. Commoditisation of Prime Brokerage
    5. Consolidation of the Hedge Fund Sector
    6. Evolution of Hedge Fund Business Model
    7. Increasing Use of Technology as a Differentiator
    8. Conclusion
  17. Appendix
    1. List of Useful Websites
    2. Prime Broker Directory
    3. Useful Job Boards
    4. Bibliography
      1.  
  18. Other Titles in the Bizle Professional Series