PCS Dunbar Securities team to join Cantor's prime services division

Feb 10, 2011 by Charles Gubert

The management team of PCS Dunbar Securities will join Cantor Fitzgerald’s prime services division.

Cantor acquired PCS Dunbar Securities in January 2011.

In a statement, Cantor said the addition of PCS Dunbar’s team would help it expand its product reach and enable a broader distribution of its multi-asset prime brokerage platform.

The team will report to Noel Kimmel, senior managing director and global head of Cantor Prime Services.

Mini primes have seen a wave of consolidations in the last two years.

“As the prime brokerage landscape continues to involve, we think that further consolidation is likely,” said Kimmel.

Mini primes burst onto the scene in the wake of Lehman Brothers’ collapse as hedge funds sought to diversify their counterparty risk. They also benefited as bulge bracket prime brokers offloaded some of their smaller hedge fund clients in order to eliminate risk from their balance sheets.

However, the mini prime market has become overpopulated recently and is facing renewed pressure from investment banks and mid-primes such as Merlin Securities and Jefferies Prime Brokerage who are taking away some of their hedge fund clients.

Some of the major investment banks have also stopped offering clearing and custody services to mini primes as they do not want to exposure to the additional risk burden associated with these small shops.

Institutional investors too have been vocal in demanding hedge funds use brand name prime brokers.

This has prompted major changes in the mini prime market. Earlier this year, it was reported FBR Capital Markets was to shut down its prime brokerage business having only established it in March 2009. Lighthouse Financial Group and its prime brokerage unit filed for bankruptcy protection with debts of $14.6 million at the end of 2010.

In April 2010, ConvergEx purchased NorthPoint Trading while in November 2010, it was announced the US derivatives brokerage firm I.A Englander & Co was in acquisition talks with Alaris.

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