TradeStation Hedge Fund Incubator
TradeStation announced the launch of the prime brokerage division in September, and Sredni spoke Dec. 1 about the unit during a presentation at an FBR Capital Markets investor conference. Sredni said the division would not only seek to land institutional investors as clients but it will also serve as a "hedge fund incubator" for some of TradeStation's retail clients by providing an opportunity for "successful traders … to become a small hedge fund."
"It's a dual strategy," Sredni said referring to the benefits for his company's retail and institutional business.
Sredni told SNL that he would consider using some of the firm's roughly $136 million of cash on hand to make an acquisition and increase the size of its prime brokerage business. However, he said TradeStation having a significant amount of cash on hand helps attract institutional clients.
"When an institution wants to deposit funds with you, they want to see the strength of your balance sheet," he said.
With its prime brokerage business, TradeStation is targeting small to midsize hedge funds, and it is not aiming to become the sole broker for those funds. Sredni said hedge funds are looking to work with more than one prime broker, and TradeStation's clients will also have accounts with such companies as Morgan Stanley and Goldman Sachs Group Inc.
"We have a good third alternative," Sredni said. source
