Proprietary trading, proprietary trading desk, or "prop desk" are terms used in our industry to describe when the firm's traders actively trade stocks, bonds, currencies, commodities, their derivatives or other financial instruments with its own money as opposed to its customers' money, so as to make a profit for itself.
Many reporters and analysts believe large banks purposely leave ambiguous the amount of non proprietary trading they do versus the amount of proprietary trading they do because it is felt that proprietary trading is riskier and results in more volatile profits.
Risk, however, is exactly what's behind the exodus of the world's biggest and baddest prop shops. Many owners of prop desks no longer want so-so traders dabbling in markets with this much risk. Indeed, there's no shortage of reasons why many prop shops today are emptier than a movie theater showing a Lindsay Lohan film. But others trading in today's market volatility see the risk as too much of an opportunity to pass up.
As a result, the Wall Street Journal recently published an op-ed piece in which 2011 was heralded as "the year of the local," meaning that in this era of electronic trading, more traders than ever are going to go to work for themselves and assume all the risk and rewards for themselves.
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