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Fidelity® Prime Services Brings Price Transparency To The Securities Lending Market With PB OptimizeBOSTON – Fidelity Prime Services®, the prime brokerage division of Fidelity Capital Markets, today announced PB Optimize, a securities lending pricing tool that displays, compares and ranks securities lending rates and performance from various prime brokers, helping hedge funds best allocate their short portfolios among their prime brokers.
PB Optimize is the first securities lending pricing tool of its kind offered by a prime broker, and is now available to Fidelity’s hedge fund clients at no additional cost.
“PB Optimize is the latest example of Fidelity’s long-standing commitment to bringing transparency to the marketplace, including securities lending fees charged by different prime brokers,” said Thomas Tesauro, executive vice president of Fidelity Prime Services. “By sharing Fidelity’s lending rates alongside those of other prime brokers we are putting our clients and their investors first, empowering them to make more informed decisions. We expect this tool will ultimately drive market efficiency, benefiting hedge funds as well as investors.”
“Using PB Optimize has improved the accuracy and efficiency of our rate discovery process,” said Adam Nemser, head trader of Southpoint Capital. “Furthermore, it has enabled us to better analyze how our rates change over time across multiple prime brokers, improving our ability to compare the quantitative and qualitative aspects of these relationships.”
Securities Lending Transparency
PB Optimize provides managers three customized modules to help them realize efficiencies and cost savings in the securities lending market.
1. Broker Scorecard: This module gives clients the ability to evaluate short balance allocations and prime brokers’ stock loan performance. Prime broker performance is determined by region, sector, market capitalization and how quickly rates change.
2. Security Research: Hedge fund clients can research and graph securities lending rates and lendable quantity information over user-defined time series.
3. Cost Analysis: This module alerts clients to rate optimization opportunities across prime brokers to find potential cost savings. In addition to rate aggregation and comparison, the technology provides average duration and realized carry expenses over different time series.
Independent securities lending data, including the quantity available to be borrowed and on loan, is provided by Markit as a valuable input into PB Optimize.
“Investors want to know that the firms with whom they’re investing are making financing decisions on their behalf based on the best possible data and analysis,” said Tesauro. “Any tool that drives transparency is good for investors and for the market as a whole.”
Fidelity Prime Services handles securities lending, execution, financing, reporting, clearing and custody for sophisticated institutional investment managers, including hedge funds, which primarily employ long and short equity trading strategies. Fidelity has 125 hedge fund clients as of June 30, 2012. Over the last two years, Fidelity’s total short financing balances have more than doubled.
PB Optimize is provided by Fidelity Global Brokerage Group, Inc. (FGBG), a wholly-owned subsidiary of FMR LLC. FGBG is not a part of Fidelity’s broker-dealer entity, National Financial Services LLC, which provides Fidelity’s other prime brokerage service offerings.
About Fidelity Capital Markets
Fidelity Capital Markets (FCM) is the institutional trading division of Fidelity Investments providing trading, products and services to a wide array of clients and Fidelity businesses. FCM executes domestic and international equity securities including block and portfolio trading, listed options and foreign exchange. It also offers securities lending, commission management and transition management. FCM trades fixed-income in a wide range of taxable and tax-exempt securities and underwrites municipal and government agency debt. The company has its own distribution channel, Fidelity Prime Services®, focused on servicing hedge funds, as well as a full suite of Electronic Brokerage Trading Products, including proprietary algorithms and a crossing network, CrossStream®. FCM offers all of its clients conflict-free1 trading, execution excellence and personal service. For more information about Fidelity Capital Markets, please visit www.FidelityCapitalMarkets.com.
About Fidelity Investments
Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $3.6 trillion, including managed assets of $1.6 trillion, as of June 30, 2012. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.
1 Fidelity Capital Markets may engage in principal trading to facilitate customer order flow.