DEFINITION of 'Prop Shop'

A proprietary trading group that usually trades electronically at a physical facility. Prop shops supply their traders with the education and capital resources to engage in a large number of deals each day.

BREAKING DOWN 'Prop Shop'

The term "prop" is derived from a shortened form of proprietary. Prop shops are very similar to trading arcades. Both offer facilities where local traders can engage in electronic transactions and have access to the latest trading technology. However, there is a distinct difference in the trading operations between the two facilities. In a trading arcade, traders will transact for their own accounts. Prop shop traders trade for the firm's account using the shop's capital. By using the capital resources of the prop shop, traders gain access to more leverage than they would with an individual account.

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