Future disruption will need to be managed in tandem with catering to shifting client activity. These challenges come against the backdrop of an uncertain - yet still pressing - regulatory timetable. Preparedness, bandwidth and flexibility will be key to adjusting to this new environment.

In the attached paper Anthony Bennett, Capco UK's Prime Brokerage Practice Lead, shares consolidated industry insights in view of the ongoing coronavirus pandemic.

These include:

1. Primes have learned lessons well… to date - They have weathered the initial storm of volatility, de-risking and volumes, achieving this owing to previous investment in platform maintenance, automation of tasks and close management of client exposure.
2. The rebirth of equity long-short strategies with signs of 'peak quant' - There are potential changes coming that will impact a prime's business mix, notably a move from equities to credit and fixed income, which will require investment into supporting large scale activity in those strategies.
3. When it comes to regulation, it's business as usual - While there are some delays mandated by regulators, primes still need to focus on the target operating model impacts of SFTR and CSDR, which have an impact on a prime brokerage's transactional engine.
4. Diversification reigns - The most diverse businesses have proven to be the stronger primes, able to withstand any trading risk losses by benefitting from greater ticket fee revenues.
5. An acceleration of the future of prime - The COVID-19 period has redoubled the focus on cost reduction. New prime target operating models are being deployed that merge their platforms with those of other global markets businesses, whilst also signalling a renewed demand for better cloud-based data driven decision making.

Anthony believes the future state of prime brokerage is a Prime-as-a-Service model, which will allow primes to provide data and services that more efficiently support their client's strategies.

Download report here

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