Prime Brokerage

A prime brokerage offer clients services with hedge funds and other large investments. Since hedge funds and other equity firms buy and sell securities on a large scale, prime brokers focus on cash management, stock loans, securities lending, reports and operations. Their line of services also includes marketing, technology development, and risk management.


Prime brokerage operations involve services from an investment bank provided with hedge funds. The investment bank buys and sells stocks, bonds, and other investments on behalf of the hedge fund. Hence the risks involved are with clients who may fail to reimburse their debt or meet other monetary commitments due to maybe financial constraints, or worse bankruptcy. Another risk is that the investment bank may fail to notify a hedge fund regarding settlements on trades.

Incurring credit losses to a bank or insurance company is another risk to prime brokering. Credit risks (counterparty risks) are those which arises from business partner (counterparty) defaults. When we speak of hedge funds, it involves a large amount of investments that may amount to hundreds of millions of dollars. If the hedge fund files for bankruptcy after 6 months when the bank provided a certain amount, the bank may lose it all.

There are also compliance risks involving prime brokering. A bank may need to conform to the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Industry (FINRA) before providing prime brokerage services. The bank will also need to comply with International Swaps and Derivatives Association (ISDA) rules for international transactions.

Risk Management

A financial institution will definitely not want to incur any losses with their investments. Providing prime brokerage services to clients always comes with a risk control and management system. This is done to ensure that efficient methods are in place to minimize or better yet totally avoid losses. Risk and control self-assessment report should be issued regularly to keep internal controls in check.

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Penny Stocks

If you want to avoid investments involving large amounts of money venturing on penny stocks might be the right one for you. Penny stocks are in fact a great way of converting your hundreds of dollars to thousands of dollars in a given period of time. Since it involves small amounts, it is very convenient for most of us who are hard on the budget. Generally it would only involve $5 or $2 a share.

When you buy penny stocks it is advisable to do it with a broker, most especially when you’re a beginner. A penny stock broker provides exclusive and excellent services to their clients. Considering databases, a broker can provide you with a very large one. With this, buying and selling penny stocks will be much easier.

But if you want to avoid the fees and commissions, you can always buy stocks without a broker. But you’ll be doing everything on your own, where to find penny stocks and where to sell penny stocks in particular will be your primary concern.

Our Tips

To keep your investments away from potential risks enroll yourself with the best brokerage firms there is. You can even find discount brokers online that are hailed the best in the industry. Do your homework, never slack off even just a bit when it comes to monetary issues.

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