FX Prime Brokerage Explained
FX Prime Brokerage (PB) is a service provided by major banks that allows institutional clients to trade across multiple venues and with multiple counterparties using the prime broker's credit and name.
What Is FX Prime Brokerage?
An FX prime broker acts as a credit intermediary. When a hedge fund wants to trade on an ECN or with a bank, it may not have a direct credit relationship. The prime broker steps in: the trade is executed in the prime broker's name, then 'given up' to the client. This allows funds to access deep liquidity across dozens of venues through a single relationship.
How Give-Up Works
In a give-up arrangement, the executing dealer trades with the prime broker (not the end client). After execution, the trade is allocated to the client's account at the prime broker. The prime broker takes on the counterparty risk and charges the client a fee. This process happens electronically in milliseconds via FIX protocol.
Major FX Prime Brokers
The FX PB market is concentrated among a handful of major banks. JPMorgan, Citi, and Barclays dominate the space, collectively handling the majority of FX PB volumes. Requirements for FX PB access typically include minimum AUM thresholds, operational infrastructure, and regulatory standing.