What Is the Difference between a ‘Custodial’ and a ‘Non-Custodial’ Prime Brokerage Model?

In a custodial prime brokerage model, the prime broker or its affiliated custodian holds the client's assets and private keys, providing a centralized point of access and collateral management. In a non-custodial model, the client retains control of their private keys and assets, and the prime broker facilitates trading via APIs or smart contracts that interact with the client's segregated wallet.

The non-custodial model minimizes counterparty risk with the broker but increases the client's operational burden.