Proprietary Trading


DEFINITION of 'Proprietary Trading'

When a firm trades for direct gain instead of commission dollars. Essentially, the firm has decided to profit from the market rather than from commissions from processing trades.


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BREAKING DOWN 'Proprietary Trading'

Firms that engage in proprietary trading believe that they have a competitive advantage that will enable them to earn excess returns.

  1. Volcker Rule

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  2. Prop Shop

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  3. Hard Dollars

    Cash fees or payments made by an investor or customer to a brokerage ...
  4. Trade

    A basic economic concept that involves multiple parties participating ...
  5. Soft Dollars

    A means of paying brokerage firms for their services through ...
  6. Broker

    1. An individual or firm that charges a fee or commission for ...
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  1. Which federal regulatory agencies approved and are now responsible for enforcing ...

    Five federal regulatory agencies approved and are jointly responsible for enforcing the Volcker rule. These agencies include ... Read Full Answer >>
  2. Does the Volcker Rule prevent commercial banks from offering shares of hedge funds ...

    The Volcker Rule does not prevent commercial banks from offering trading services in hedge or private equity funds to their ... Read Full Answer >>
  3. What is the purpose of the Volcker Rule?

    The Volcker rule limits two main types of activities by large institutional banks. Banks are prohibited from engaging in ... Read Full Answer >>
  4. How is working capital different from fixed capital?

    There are several key differences between working capital and fixed capital. Most importantly, these two forms of capital ... Read Full Answer >>
  5. Do variable annuities guarantee returns of principal?

    Variable annuities are subject to the ups and downs of the market, so they do not guarantee returns of principal. To mitigate ... Read Full Answer >>
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    Since 2008, when the Federal Reserve slashed interest rates to zero and then kept them there indefinitely, dividend-paying ... Read Full Answer >>

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