Prime Broker
a.k.a. Prime brokerage, PB
A big bank that provides hedge funds and large traders with credit, access to many dealers, and settlement services under one roof.
A prime broker is a full-service bank for big traders. It lends them money, lets them trade with many different dealers while settling everything through one account, and handles the paperwork. Instead of setting up credit with twenty banks, a hedge fund sets it up with one prime broker, which stands in the middle.
It is a powerful arrangement, but it concentrates risk. When a client blows up, as when the fund Archegos collapsed in 2021, the prime brokers holding its positions can take huge losses.
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