Miniprime industry suffers some growth spurts

The rapid ascent of the hedge fund industry in recent years has led to a large jump in the number of so-called miniprimes. These are prime brokers that cater to smaller hedge funds. But as the entire hedge fund industry faces questions about growth, the miniprime industry is already showing signs of strain. The fact is that commissions are only going lower, and hedge funds, even the small ones, want the dazzling services associated with large prime brokers. They just want it cheaper. Add to that the trend by hedge funds toward supporting only one or two primes and you've got a recipe for lots of consolidation. Commission-only shops had better start searching for some proprietary services to offer, or they won't be around long. There is probably room for innovation, but it will take a really creative firm to come up with something that can support the business.

For more:
- Here's an article from Investment Dealers' Digest. (For FierceFinance readers)