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Proprietary trading (also known as prop trading) occurs when a trader trades stocks, bonds, currencies, commodities, their derivatives, or other financial instruments with the firm's own money (instead of using depositors' money) to make a profit for itself.[1] Proprietary trading can create potential conflicts of interest such as insider trading and front running.[2][3][4]
Proprietary traders may use a variety of strategies such as index arbitrage, statistical arbitrage, merger arbitrage, fundamental analysis, volatility arbitrage, or global macro trading, much like a hedge fund.[5] Many reporters and analysts believe that large banks purposely leave ambiguous the proportion of proprietary versus non-proprietary trading, because it is felt that proprietary trading is riskier and results in more volatile profits.
- ^ Heather Stewart (21 January 2010). "What is 'proprietary trading'?". The Guardian.
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:2was invoked but never defined (see the help page). - ^ "Proprietary Trading: What It Is & Related Trading Firms". DayTradeTheWorld. 28 September 2020.