Series 14: 4.1.3.6. Other Types Of Brokers

Taken from our Series 14 Online Guide

4.1.3.6. Other Types of Brokers

Prime brokers are firms that provide services for other firms (e.g., hedge funds or other institutional investors). Prime brokers are typically investment banks, but can also be broker-dealers. They often clear and settle trades that involve numerous brokers. When a customer firm of a prime broker wants to effect a trade, it will first go to an executing broker to handle the trade. The executing broker will then inform the prime broker, which will clear and settle the trade.

•Prime brokers are required to maintain at least $1,500,000 in net capital.

•Executing brokers are required to keep at least $1,000,000 in net capital.

•Firms that deal solely with direct participation programs or engage exclusively in mergers and acquisitions are only required to carry a minimum of $5,000.

Summary Table

Type of Broker

Minimum Net Capital Requirement

Carrying firms that carry accounts and hold custody of client assets

$250,000

Firms that carry accounts but do not hold custody of client assets

$100,000

Introducing firm that does not receive customer securities

$5,000

Introducing firm that does receive customer securities

$50,000

Firms that deal in mutual funds only and sell on a subscription basis only

$5,000

Firms that deal in mutual funds and accept wire orders

$25,000

Firms that deal solely with DPPs or engage exclusively in mergers and acquisitions

$5,000

Market makers

$100,000–$1,000,000

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