[ I N - D E P T H
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C O V E R
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Equities Revenues by Product 1H18
(4)%
20%
(18)%
(5)%
20%
YoY Change
1Q18 vs. 1Q17
28.5
24.7
23.8
1.9
1.8
7.6
23.4
10.2
8.1
2.0
2.0
22.2
1.8
10.7
8.1
8.6
26.6
1.9
9.2
6.6
8.9 35%
7%
6.6 5.8 6.2 5.1 4.7 5.0
1H13 1Q14 1H15 1H16 1H17 1H18
Cash Equities
Equity Derivatives
Prime Services
Futures and Options
Source: Coalition
Note: Numbers may not add up due to rounding. Percentages are based on unrounded numbers.
synthetic prime brokerage. These services
provide clients with access to total return
swaps on single stocks, equity baskets and
indexes.
Banks such as ING and UBS have
launched new synthetic prime brokerage
services over the years to meet this trend,
as well as some of the larger primes like
JP Morgan, which see the electrification
of equities and equity derivatives tied to
prime brokerage.
“There has been a lot of focus on syn-
thetic prime brokerage over the last three
years, as well as DMA (direct market ac-
cess) and execution into prime, which has
been a forerunner of MiFID II and elec-
tronic execution services. Going forward,
the market will continue to look at ways
to innovate and continue to offer efficien-
cies and/or pricing that prime clients can
consume. Our aim is to see how best we
can leverage prime across other products
of the bank,” says Jonathan Cossey, global
co-head of prime brokerage, JP Morgan.
Furthermore, the emphasis on execution
capabilities has mirrored the rapid rise
of quantitative hedge fund strategies. Ac-
cording to the Deutsche Bank survey, over
three-quarters of respondents said they
allocate to systematic hedge funds, and of
17%
9.1
10.1
7.0
10%
those investors, over half plan to add at
least one quantitative strategy in 2018.
It is because of this that prime brokers
are invested heavily in technology, de-
veloping new execution techniques, and
then linking quantitative fund clients to
other areas of the franchise.
“It is increasingly about coordination
across the equities, futures and fixed
income, which are linked via financ-
ing, clearing and execution across the
ecosystem,” explains Barclays’ Gee. “For
example, we are investing in our smart or-
der router and algo platforms, which will
further enhance our execution offering.”
The Hedge Fund Annual 2018
globalcustodian.com
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