Prime Time... Derivatives

'The Safety of Prime Brokers"
Real World View

Wall St. Braces Itself For SAC Fallout

Clampdown On Insider Trading

Financial Times - 7/28/2013

"All eyes have been on SAC Capital, the $14bn hedge fund, accused this week of insider trading on an unprecedented scale.  The U.S. government is now seeking as much as $10bn in penalties and disgorged profits from the hedge fund."

"Banks that provide credit and trading facilities through their prime brokers to SAC were this week assessing their counterparty risk to the hedge fund.  Some bank executives said they had instructed risk management staff to examine derivatives exposure to the hedge fund to determine whether SAC's cash pile was sufficient to safeguard any potential losses."

"Prime brokers provide the capital that allows hedge funds to leverage their bets.  But their most lucrative function is to funnel business to trading desks in other parts of the bank, which structure derivative positions and lend securities to sell short."

But again, NCUA has its own opinion of the honesty and reliability of prime derivative brokers ...

"The Safety of Prime Brokers"
NCUA World View