Prime brokers offer what is called "arranged financing" which allows hedge funds to gain maximum leverage - more than allowed under the Portfolio Financing platform. I understand there is an element of stock lending where some or most of the Hedge Fund's long/short securities in the account are being transferred (lent out) to another legal entity (usually offshore), which leaves only a fraction of the portfolio in the main account, where a 15% HC is applied. The rest of the portfolio is collateralized as a stock loan.... I am just missing the exact details of how and what is trasfered and how is the additional leverage achieved? Thank you

  • $\begingroup$ In simple terms there are fewer restrictions on leverage (rehypothecation) in the UK than in the US. Hence it may be possible to borrow more by transferring your assets from US to UK (specifically to a UK subsidiary of your prime broker). It is a way to get around SEC Rule 15c3-3. But I don't understand all the details $\endgroup$ – noob2 Feb 8 '17 at 1:58

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