The European Securities and Markets Authority (ESMA) has published a working paper analysing the potentially vulnerable and systemically relevant financial intermediation chain established by hedge funds and prime brokers. Its dataset covers the 306 largest global hedge funds and their prime brokers over the period July 2001 to December 2011.

The study illustrates that hedge funds and prime brokers act as complementary trading partners in normal times. However, it observed that this form of financial intermediation may be severely impaired in times of market distress. This can be explained by the hoarding of liquid securities by prime brokers who are eager to avert runs by their clients.