Robert Aaron T354_ Garcia#51

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What is prime brokerage in forex and why do institutions use it?

Prime brokerage provides institutions with access to liquidity, leverage, and clearing services through a central relationship. Instead of opening accounts with multiple banks, a hedge fund uses a prime broker to trade across venues, settling through one counterparty. Benefits: efficiency, credit access, and leverage. Risks: dependency—prime broker failures (e.g., Lehman 2008) can destabilize clients. Retail traders rarely access prime brokerage, though some brokers offer “prime-of-prime” services. Prime brokerage underpins institutional forex, explaining how large players access deep liquidity while managing credit and operational risk.