ING Capital Markets unveils synthetic PB platform

ING Capital Markets unveils synthetic PB platform

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New York-based ING Capital Markets has launched a synthetic prime brokerage platform for hedge funds.

Up until now the broker dealer, part of the wider Dutch bank ING, had offered clients synthetic products through its legacy contract for differences (CFD) arm.

Under the new set-up, the firm will provide global, cross-asset portfolio swap products offering the functionality and sophistication of a traditional prime brokerage service.

A growing number of investment banks and buy-side firms have looked to enhance their synthetic finance capabilities in recent years, whereby managers have access to derivative based equity financing through total return swaps and CFDs.

Much of the growth is down to the balance sheet efficiencies of synthetic products, particularly since regulations such as capital and leverage ratio rules have led to a drastic increase in the cost of financing.

As a result, some prime brokers have had to shrink in size as they scale back on smaller hedge funds and reduce less profitable relationships.

Instead many have focused more on synthetic financing in a bid to lower the cost of funding, provide higher leverage to clients and pricing flexibility. 

Research by 4sight, a financial tech firm acquired by Broadridge this year, has noted rising swaps volumes in Asia, US and European markets.

Swaps also remain popular in emerging markets where they are used for market access purposes.

There are, of course, numerous market, interest-rate and counterparty risks firms must consider. 

"We offer the flexibility of a multi-asset portfolio swap which is operationally efficient, streamlined and provides additional collateral and portfolio margin benefits," Michael Baudo, ING Capital Market’s regional head of financial markets Americas and global head of securities finance, wrote in a statement this week.

"We are excited to launch a platform that differentiates itself and adds value to clients while drawing upon the more than 20 years of experience our team has been providing securities finance solutions to the market."

Prime brokerage veteran Artie DiRocco, current head equity securities finance for ING Capital Markets in the Americas, has also been a key figure in the development of the platform. 

The initial launch phase will be managing and executing all balance sheet, back office and administrative functions associated with derivative exposure to equities.

In the next phase, functionality will include fixed income and additional asset classes in line with ING's clients' needs. 


 

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