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Interactive Brokers Jefferies
G
“S
reenwich, Connecticut-headquartered Interactive Brokers
ervice is outstanding!” writes a client of longstanding.
is a pure agency brokerage. Hedge fund managers who find
“They are quick to respond to questions or issues and
their funds are no longer attractive to the major prime bro-
pro-active in notifying us of issues with respect to our fund.” The
kers, or who consider the cost of using the investment banks
average score for client service suggests he is not alone. Indeed, a
excessive, can find a home at Interactive. It offers execution
new client confirms that the “team is strong – very knowledgeable
and clearing, margin and securities financing and custody and
and accommodating.” The assessment of the core services is not
asset servicing, including corporate actions processing (Interac-
much less effusive. It helps that the Jefferies prime brokerage
tive has links to eight custodian banks, including BNY Mellon,
offering, rooted in the origins of the firm as an equity trading and
BBH and State Street). The firm has a reassuringly conserva-
market-making house of the 1960s, is admirably no-nonsense. The
tive philosophy set by its founder – Interactive is still majori-
firm showcases trading and execution, stock borrowing, margin
ty-owned and controlled by its original shareholders –towards
finance and repo, online reporting, efficient post-trade operations
the structure and evolution of financial markets in general and
and custody- plus capital introductions. The average scores the
the assumption of risk in particular. However, Interactive is
firm collects across almost all of these service areas vary between
nevertheless a strong believer in the power of technology to cut
the very good and the excellent. There are comments to match
costs and increase transparency. It uses software to connect cli-
across trading and execution (“In our commission reviews,
ents automatically to more than 100 stock exchanges and other
Jefferies’ execution is typically positive vs. VWAP and average
execution venues around the world, and to automate as much
price”), stock borrowing (“In eight years, we have had only
as possible of the trade and post-trade transaction processes
one stock recall”), technology (“Their reporting system is very
(including risk management). The apparently puzzling score
reliable – our fund info is typically posted before 7:30 AM EST”)
for technology is explained by shortcomings on one aspect only.
and operations (“Our experience with Jefferies operations staff
The promise of Interactive technology on the execution side is
is excellent”). There is an exception, and it is a predictable one,
lower transactions costs across equities, bonds, options, futures,
delivered by a minority and characteristic of a notoriously difficult
currencies, metals and exchange-traded and other funds. The
area. Capital introductions nevertheless still attracts a favourable
Weighted
firm does collect one of it best scores for trading and execution, Weighted
review. “Although a small PB client, Jefferies was gracious to in-
average
average
scores and its best for fixed income execution. The scores for futures scores vite us to their flagship event in 2017,” writes a respondent. “They
to provide cap intro
support that
helpful to our
2016 and options
6.09 is not as impressive,
2016 but that
2017 for foreign
2018 exchange 2016 continue 5.91
2016
2017 has been
2018
is
even
better.
In
stock
borrowing,
where
clients
with
long
firm.
Excellent
team
and
strong
leadership.”
The
Jefferies
2017
4.83
6.09
4.83
4.33
2017
5.99
5.91
5.99
5.76 scores
are able to make their assets available to other clients 2018 do falter in
financing and derivatives, but the averages are based
2018 positions 4.33
5.76
with short
on a limited
Respondent
profile positions, the detailed scores indicate clients are not Respondent
profile number of responses. Besides, the human factor is
Small completely
fund
fund
convinced that Interactive has access to the hard-to- Small clearly
what
binds this group of clients to Jefferies. “We would
73%
50%
managers
borrows they need, nor that it can offer them protection against managers
definitely recommend Jefferies’ prime broker services,” concludes
Medium-
buy-ins and recalls. The only comments 9%
are submitted by single Medium-
a happy client. “Great people to work 21%
with and a company that is
18%
29%
sized fund
sized fund
Weighted
client, who is looking for improved 18%
levels of service, especially in
clearly committed
to meeting the needs of their clients.”
managers
managers
post-trade operations and online average
reporting.
50%
Large fund
2016
managers
6.09
Americas
Europe and
Middle East
Asia
9%
2017
4.83
64%
18%
scores
2018
2016
5.91
PROFILE OF RESPONDENTS
73%
4.33
2017
5.99
2018
5.76
By size
18%
9% scores by service area
Weighted average
18%
Service area
Weighted
average
score
Large
73%
+/- the
Medium
global
Small
average
Capital
N/A
introduction N/A
s
Client
3.00
-50.1%
service
service area Consulting 18%
N/A
N/A
Weighted average
scores -38.1%
Operations
3.69
+/- the
Technology
4.29
-23.4%
2016
2017
global
18%
4.83
Product 6.09
64%
average
3.83
-29.7%
development
N/A
-50.1%
N/A
-38.1%
Respondent profile
By location
Small fund
50%
managers
18%
Medium-
29%
sized fund
managers
18% fund
Large
21%
64%
managers
Americas
100%
Europe and
N/A
Middle East
Asia
N/A
Large fund
managers
2016
Americas
5.91
Europe and
Middle East
Asia
21%
2017
100%
5.99
2018
29%
PROFILE OF RESPONDENTS
5.76
N/A
By N/A
size
By location
Weighted average scores by service area
21%
+/- the
Large
global
50%
Medium
average
Weighted
Americas
average
Europe and Service area
score
Middle East
Capital
29%
Asia
5.09
introduction
Americas
Europe and
Middle East
Asia
Small
-5.1%
s
Client
5.95
-1.0%
service
Consulting
N/A
N/A
Operations
6.25
4.8%
Weighted average scores by service area
Weighted average
Technology
5.50 scores -1.9%
Weighted
+/- the
Service area
average
global
2018
2017
Product 2016
5.74
5.3%
score
average
4.33
development
5.91
5.99
Capital
5.09
-5.1%
introduction
Risk
100%
5.88
s
5.5%
Risk
management
3.66
-34.3%
Client
5.95
-1.0%
management
94
Global Custodian
The Hedge
Fund Annual 2018
service
Asset safety
5.97
4.1%
Asset safety
4.82
-16.1%
Consulting
N/A
N/A
Sales and
5.76
-6.1%
Sales and
Operations
6.25
4.8%
marketing
4.24
-30.8%
100%
2018
5.76