Prime Brokerage: The Same Position, Financed by Five Banks at Once
Prime brokerage bundles financing, securities lending, custody and capital introduction into one relationship for one client, usually a hedge fund.
Prime brokerage bundles financing, securities lending, custody and capital introduction into one relationship for one client, usually a hedge fund. It has failed twice, in opposite directions: in 2008, Lehman Brothers' collapse froze client assets it had the legal right to re-lend, and in 2021, Archegos Capital Management held the same concentrated stock positions through swaps at five separate prime brokers, none of whom could see what the other four saw. What the bundle actually contains, why the industry's fix for the first failure helped cause the second, how India keeps the same functions split across separately registered entities, and what both failures teach about designing a risk model — with paired Indian and global examples throughout.
Surya · 13 min read