What Is the Role of a Prime Broker in Managing a Market Maker’s Inventory and Financing?

A prime broker acts as a centralized counterparty, providing a suite of services to market makers, including trade clearing, settlement, custody, and financing. They allow market makers to consolidate their positions across multiple venues, simplifying inventory management and reducing operational risk.

By offering competitive financing rates, the prime broker lowers the market maker's cost of capital, which can facilitate tighter spreads.