BoE’s Jackson flags dangers of ballooning prime brokerage market
Bank’s executive director says new players will need to get up to speed on risk management
High and rising demand for prime brokerage services could add risks to an already complex and opaque market, the Bank of England’s Rebecca Jackson said in a speech on January 28.
Prime brokerage offers financing to hedge funds for both long and short positions. Jackson, an executive director at the BoE, said scale was important in the market as it allowed prime brokers to “internalise” transactions.
Internalisation involves re-using equity posted as collateral for one client’s long position as a
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