Here, courtesy of the FT’s new hedge fund correspondent, is the internal memo on HSBC’s new prime brokerage services.
Intriguingly enough, we’re told there will be no rehypothecation in this one — which in theory should mean that hedgies’ assets are kept in segregated accounts, and therefore wouldn’t be frozen should HSBC encounter sudden liquidity or funding problems — something that happened when Lehman collapsed.
When the doomed bank went under, hundreds of hedgies found their assets suddenly stuck at the failed financial institution. The rehypothecation process — and prime brokerages — haven’t really recovered since. So it’s interesting to see HSBC trying to push through a new model.
Here, in any case, is the memo:
Formation of HSBC Prime ServicesWe are pleased to announce the formation of HSBC Prime Services, a new Joint Venture between Global Markets and HSBC Securities Services (HSS).
HSBC Prime Services will bring together and leverage the HSS ‘Custody Plus’ proposition and Global Markets products and distribution platform to offer clients an integrated and seamless capability for their custody, financing, execution, collateral management, clearing and reporting needs. In today’s market environment, our ability to provide clients with full security and transparency over their assets in segregated accounts, together with the opportunity to use some of these assets as security for financing, will further enhance our product offering to leading hedge funds and fund managers. With our global footprint, local market knowledge, quality of services and financial strength, we are well positioned to grow market share in this area.
HSBC Prime Services will be headed by Cian Burke, currently CFO and Global Business Manager for Global Markets. He will be responsible for developing our Prime Services business, initially focusing on our equity and fixed income platforms, and delivering an enhanced range of services and products to our clients. In his new role, Cian will report jointly to Samir Assaf and Tim Howell. Further announcements on Cian’s successor and on the structure of HSBC Prime Services will follow.
Please join us in wishing Cian every success in leading this new venture.
Samir Assaf
Head of Global MarketsTim Howell
Global Head, HSBC Securities Services
Related links:
Collapse of Lehman puts prime broker model in question – FT
Deleveraging after Lehman, evidence from reduced rehypothecation – IMF working paper
Prime brokerage: The day the music stopped – EuroMoney