Consultants get fees for helping to lower prime brokerage rates their clients get charged.
Prime brokerage is the business of servicing hedge funds, including securities lending, trade execution and cash management.
The prime brokerage desk operates independently from its syndicate desk, which led the underwriting of Facebook's shares.
Morgan Stanley is one of the three biggest in the prime brokerage business, along with Bear Stearns and Goldman Sachs.
Goldman's prime brokerage business, which assists and finances hedge fund stock purchases, has been racking up fees and interest rate spreads.
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"Hedge fund clients have less to worry about when the prime brokerage is part of a larger investment bank, " he said.
Prime brokerage is the business of catering to hedge funds, particularly lending securities to funds so they can execute their trading strategies.
Schwartz acknowledged the liquidity crisis was prompted by customers of its prime brokerage and trading areas pulling cash out of the company.
Niederauer spent 22 years at Goldman, most recently as co-head of its equity division execution business, which includes trading, clearing and prime brokerage.
It got rather late into prime brokerage lending copious amounts of money to hedge funds and private-equity firms where other investment banks have done well.
Hedge funds acquired during the 2006-2007 bubble are being spun off, and the firm lost its leadership position in prime brokerage to Goldman Sachs.
"The concern is that those who are pushing into prime brokerage are either aggressively lending" or cutting trading commissions to get the business, he said.
The bank has long been rumored a potential outright buyer of Bear Stearns, attracted to its huge prime brokerage business, and--ironically--to its mortgage securitization business.
The unit handles the investment bank's clearing and prime brokerage businesses.
The prime brokerage unit provides services to hedge funds, a lucrative niche business that has grown in importance with the expansion of the hedge fund industry.
Steven Kessler, chief compliance officer of hedge fund SAC Capital Advisers, was lauded for his work in advancing the industry's interests in prime brokerage and securities-lending issues.
Palmer's statements are similar to comments made recently by executives at Morgan Stanley and Bear Stearns, which, together with Goldman, control 60% of the market for prime brokerage services.
However, this rule can, and often is, bypassed through prime brokerage subsidiaries in the UK since the UK has absolutely no statutory limit on the amount that can be re-hypothecated.
Minikes, who has been with the company since 1978, was instrumental in both establishing Bear's prime brokerage business in the early 1980s and in forming Bear, Stearns Securities in 1991.
The firm is said to have offered stay-on bonuses to some key people, especially in areas like prime brokerage where Morgan Stanley wants to hold on to its dominant market share.
On Tuesday, Deutsche Bank announced a broad reorganization of its prime services division, naming Mark Haas as global head of prime brokerage and Frank Nelson as global head of prime services sales.
Consulting firms say they have seen a surge of interest from banks keen to sharpen their service in everything from retail banking to prime brokerage (the financing of trading by hedge funds).
On Tuesday, Deutsche Bank announced a broad reorganization of its prime services division, naming Mark Haas Mark Haas as global head of prime brokerage and Frank Nelson Frank Nelson as global head of prime services sales.
In one e-mail, the unnamed co-conspirator tells Chilowitz he is going to approach "certain billionaire managers of a hedge fund about working for them" and asks Chilowitz to get certain confidential prime brokerage data.
In addition to the below-market rent, it gave hedge fund clients low-interest personal loans, lavish perks and other gratuities to induce the funds to stay and generate additional business for UBS's prime brokerage operations.
The eight, including Robert Karofsky , Morgan's U.S. head of cash equity trading, are jumping ship after Morgan Stanley's equities group posted the best revenues since mid-2001, driven by success in Morgan's prime brokerage group.
Morgan Stanley's own website lists 20 pages of available jobs in its North American institutional securities division, including many technical and risk management posts but also positions in equity research, in derivatives and in prime brokerage.
The global head of equity and derivatives for BNP Paribas, Yann Gerardin, told Forbes.com on Wednesday that its latest acquisition--Bank of America's equity prime brokerage unit--would give the bank an attractive springboard into the lucrative American market.
Goldman Sachs Group , Morgan Stanley and Bear Stearns Cos. dominate the market, particularly for equity prime brokerage, but a handful of commercial banks, including Bank of America and Citigroup , have been chomping at the bit to get bigger.
With prime brokerage (a business that caters to the trading and business needs of hedge funds) as a primary revenue source for the company, it's unclear just how much business Bear Stearns has lost in the last few days.
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