Building The Prime We Need
Like many of you, we’ve been paying close attention to changes in the prime industry. The market is evolving. Primes aren’t. If anything, they’re shrinking.
The primary problem is infrastructure. Primes run on clearing and custody systems that are old and brittle. They increase costs and limit service capacity, creating insurmountable hurdles for a growing number of fund managers who no longer make the cut. They also keep the customer experience stuck in the past.
Clearing and custody systems are the beating heart of a trading business. Replacing them is risky and complex. It’s understandable why primes are hesitant to make these changes, despite their growing costs.
A secondary problem is capital. Primes have access to vast financial resources, but those resources are increasingly being rationed. The largest and most profitable funds get access to the bulk of those resources, while smaller funds make do with less.
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