LP, prime broker and prime of prime: what each one is and which you need

Few confusions cost as much money in this industry as mixing up these three figures. A broker that thinks it's talking to a prime broker when in reality it has an aggregator in front of it, or a prop firm looking for prime brokerage when what it needs is an execution relationship, both end up signing structures that don't fit their operation.

This article separates the three, without the diplomacy.

Prime broker: the one that lends you credit

A prime broker is, in essence, an entity — traditionally an investment bank — that grants you credit and gives you access to the interbank market in its name.

What it actually does:

Extends credit lines so you can trade with leverage
Executes and settles on your behalf against multiple counterparties
Consolidates custody, margin and reporting
Lends you its name and its balance sheet in front of the rest of the market

What it demands in return:

High minimum capital, historically tens of millions of dollars
A credit approval process that assesses your balance sheet, not your business plan
Legal structure, audit and governance to match
Volume that justifies the relationship

After 2015 — when the Swiss National Bank let the franc go and several brokers vanished in hours — prime brokers sharply cut their appetite for small and medium counterparties. The phenomenon became known as prime brokerage de-risking and it's the reason the third figure in this article exists.

If you're a regional broker with seven-figure capital, a prime broker isn't going to take you. It's not a matter of negotiation; it's their risk model.

Liquidity provider: the one that gives you prices

A liquidity provider in the strict sense is an entity that provides prices — usually a bank or a non-bank market maker — that others execute on.

It's important to understand this because the term is used with enormous laxity. In practice, when someone introduces themselves as "your liquidity provider," they could be describing any of these:

| What they say | What it might actually be | |---|---| | "We're your LP" | A Tier-1 bank that genuinely makes markets | | "We're your LP" | An aggregator combining third-party feeds | | "We're your LP" | An entity that executes you as a client and calls that providing liquidity | | "We're your LP" | A reseller with a markup on someone else's feed |

All four are legitimate businesses. But they imply different risk structures, costs and regulatory obligations, and the label doesn't tell you which one you have in front of you.

The useful question isn't "are you an LP?" but "where does your price come from and what role do you play in my execution?"

Prime of prime: the middle layer that arose out of necessity

The prime of prime appeared to cover the gap left by bank de-risking: entities that do have relationships with prime brokers and resell that access, aggregated, to brokers and firms that wouldn't qualify on their own.

What it offers:

Aggregated access to institutional-grade liquidity without a prime broker's minimum capital
Margin and credit on intermediate terms
Onboarding in days or weeks, not months
A single integration point instead of several bilateral relationships

What it implies:

Concentrated counterparty risk. Your market access depends on the health of an intermediary, not a bank.
An additional markup in the chain, which someone pays.
Highly variable quality: under the same label you'll find serious operators alongside resellers with little more than an integration.

How to tell which one fits you

The honest answer depends on three variables: your capital, your volume and your regulatory structure.

You need a prime broker if: you have eight-figure capital or more, volume that justifies the relationship, and a legal and audit structure that can withstand their due diligence. If you're reading this article to find out, it's probably not your case yet — and that's not a problem.

You need an institutional execution relationship if: you run a client book and what you're after is where to execute that flow with depth, latency and risk control, without taking on the burden of prime brokerage. This is the case for most regional brokers, prop firms and mid-sized funds.

You need a prime of prime if: you specifically want credit and intermediate margin on aggregated access, and you're willing to take on the concentrated counterparty risk that implies.

The regulatory question almost nobody asks

Here's something that in LATAM gets overlooked systematically and can invalidate the entire structure: what the counterparty in front of you is legally permitted to do.

Licenses aren't interchangeable. An entity authorized as an intermediary in the execution of transactions for clients can, precisely, execute your transactions. That same entity may not be permitted to supply you a wholesale feed for you to run your own book against: in several jurisdictions that second activity requires a different license.

The practical consequence is uncomfortable: you can sign a perfectly drafted agreement with a perfectly regulated entity, and still be contracting an activity that its license doesn't cover. If the regulator catches it, the problem isn't only theirs.

Always ask for two things: the license number and category, and the public register where you can verify it yourself. An entity that publishes its number but won't tell you where to check it is halfway to transparency.

Quick decision table

| | Prime broker | Prime of prime | Execution relationship | |---|---|---|---| | Minimum capital | Very high | Medium | Low to medium | | Onboarding | Months | Weeks | 48–72 hours | | Credit | Yes, direct | Yes, intermediated | Depends on the relationship | | Counterparty risk | Bank | Concentrated in the intermediary | Depends on the entity | | For whom | Large institutions | Brokers that need credit | Brokers, prop firms and funds that need to execute |

Where Exura Prime fits

To be explicit, because it's exactly the kind of ambiguity this article criticizes: Exura Prime Ltd is authorized and regulated by the Financial Services Commission of Mauritius as an Investment Dealer. Brokers, prop firms, hedge funds and managers onboard as institutional clients and execute through us — we act as intermediaries in the execution of their transactions.

We are not a prime broker: we do not extend interbank credit lines. We do not supply wholesale feeds for you to run your own book against.

You can verify the license in the FSC's public register, linked from our legal information page. If your case is an institutional execution relationship, here's the detail for brokers.

Frequently asked questions

Is a prime of prime worse than a prime broker? It's not worse, it's different. A prime of prime solves a real problem: institutional access for entities that don't qualify for direct prime brokerage. What you have to understand is that it introduces one more intermediary into the chain, with its markup and its counterparty risk. Assess that intermediary's financial and regulatory health with the same rigor you'd apply to a bank.

Why does everyone call themselves a "liquidity provider"? Because it's the term with the most search volume and the one that sounds best in a deck. That doesn't make it inaccurate in every case, but it does make it uninformative. Ask about the specific mechanism, not the label.

Can I have several relationships at once? Yes, and many mid-sized brokers do: they diversify counterparties to reduce concentration risk. The cost is operational — more integrations, more reconciliation, more relationships to manage — and it only pays off above a certain volume.

What happened in 2015 and why does it still matter? On 15 January 2015 the Swiss National Bank removed the franc's cap against the euro. The move was so violent that several brokers were left with negative equity in minutes and some prime brokers took losses on counterparties they couldn't cover. The structural consequence was a mass withdrawal of appetite for small counterparties, and that contraction is what still defines the map today.