We at Indiana Grain have been hearing a lot of comparisons lately between BP and proprietary trading firms. With gushes equally as powerful as those hitting the Gulf, prop shops are leaking talent at an alarming rate, some via termination and others via resignation. 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. In its simplest definition, Proprietary Trading activities are financial transactions undertaken by an organisation using and risking its own capital. 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. Here at Aliom Trading we focus primarily on spread trading opportunities in global futures markets. Proprietary Trading firms do not have clients, do not sell or broker deals and products, but survive and prosper through a thorough understanding of risk and money management.


We develop our Traders to be adept at trading across multiple strategies, across multiple exchanges and in multiple timeframes. As a consequence of their activities, proprietary traders generally provide liquidity to the market and a risk transfer mechanism for other market participants. If we then could buy apples at $4.50 per kg, and tried to resell the apples at $5 per kg, this would be considered to be Proprietary Trading.



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