Hi, Bob, Thank you for your help and posts today. I am not quite sure what your company do and how your company charge for your service as introducing broker and connect to ML. I notice the Merrill Lynch Edge on their website. What's difference between through introducing broker and through Edge? For security lending, can ML do a better job than Interactive Brokers finding shares to short? Thank you for your help
Think about your trading style/strategies and what you are trying to accomplish by moving away from IB before you make your decision.
ML Edge is a retail product that we don't offer. What we offer is ML Professional that is a division of B of A Merrill Lynch designed to service the needs of Broker Dealers, Hedge Funds and Professional traders. ML Pro does not offer IRAs or Reg-T accounts. They offer Prime Brokerage Services to Market Makers, JBOs and customer through Customer Portfolio Margin. If as a customer you tried to go direct to ML Pro, they would not accept your account unless it was very large. Even then, without a direct representative on your account, good luck getting anything done. As the Introducing Broker, we are responsible for servicing the account for the client to the prime broker. We also buy volume in bulk and mark it up to our clients. If you could go direct, you'd likely pay the same or more for commission's. By going through our relationship, you get our service for the same or less than going direct. We have direct contacts for dealing with them. As to comparing the availability of hard to borrow stock between IB and ML, I have no idea which would be better in rates and size of available locates in a specific security. I'm sure IB is very good. ML is consider one of the best. When I was a GSEC client (Part of Goldman Sachs) as a market maker, there were times I was getting bought in and my friends at ML Pro were not. Bob
BTW, one other thing about ML Pro. They won't just take any account like other firms. We have to get a copy of a prospective clients current portfolio and present it to the risk department with an estimate of the AUM for the account. They then decide if the risk is acceptable. Only then can we offer a new account. This is common practice now at many of the large Prime Brokers. Eg GS, Pershing and JPM to name a few. And their minimum account size is much higher than ML Pro. Bob
What an I missing here? He's not interested in a JBO and his needs seem quite ordinary. There must be a dozen firms (or two, or three dozen) that can handle this $500,000 account.
I don't know what his needs are, I never spoke to him. We offer customer portfolio margin. Many of the Brokers that offer CPM under $5MM, are small online firms that clear through other Prime Brokers like Penson. CPM is very difficult to implement so very few prime brokers offer it. Can you really name a dozen, I can't.
Got to set a few things straight on this thread though: You should be looking a balance sheets, not CFTC lists or funds under management. Client funds are segregated and have nothing to do with a firms well being. It's firm capital and risk management that you should be looking at. Witness MF, Lehman, Bear, ING as examples. IB's business is also different than the Merrill's and the other firms you list so you're comparing apples and oranges. But since you posted, Client assets: IB has about $30 billion in client assets (not the $17 that you posted). IB is not a hedge fund, doesn't prop trade, doesn't have off balance sheet items or hold any CDS, CDO, or MBS. Also CFTC capital lists don't show the entire story as that doesn't include all sides of the businesses. For a true picture of a firms capital, you should look at their financials. FWIW, IB Group has over $4.8 Billion in shareholder equity and IB LLC $1.7B. If strength and security is your main concern, it's easy to argue that IB is one of the safest on the street. A $500K account is very nice and nothing to sniff at but in reality, it is a small amount of assets when looking at the bigger picture. For example, many of the banks/prime brokers won't even look at an account with AUM < $100 million.
I agree with most of what DEF says except the two of us disagree over the statement that IB 'doesn't prop trade.' Either way there is no perfect Prime Broker for everyone. IB has a target market and fills that segment well. We offer Penson and ML Pro. They have an offering to fit their target market and they both do it well. If you have AUM over $15M, I hear JPM is great. I think you get the picture. In the end, as traders we make or loss money from our strategy, not our Prime Broker. You should pick the relationship that provides you with the choices and service that fits your business model. Bob
IB LLC is a separate entity under the group. The assets, funds, risk are isolated. IB LLC brokerage does not prop trade. You can disagree but all I can do is state facts and point out that the financials for IB LLC are freely available on our website.