Proprietary Trading

AAA

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.

INVESTOPEDIA EXPLAINS 'Proprietary Trading'

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

RELATED TERMS
  1. Volcker Rule

    The Volcker rule separates investment banking, private equity ...
  2. Commission

    A service charge assessed by a broker or investment advisor in ...
  3. Prop Shop

    A proprietary trading group that usually trades electronically ...
  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 ...
RELATED FAQS
  1. What is the difference between technical analysis and fundamental analysis?

    Fundamental analysis and technical analysis are distinct methods used to research and evaluate securities. Fundamental analysis ... Read Full Answer >>
  2. What does it mean to be absolutely risk averse?

    Some people are absolutely risk-averse, which means that they cannot tolerate sustaining any sort of loss, even a temporary ... Read Full Answer >>
  3. How are Tweezer patterns interpreted by analysts and traders?

    The tweezer is a very common candlestick pattern. Theoretically, this pattern is an indication that the current trend has ... Read Full Answer >>
  4. What are some popular mutual funds that give exposure to the drugs sector?

    The pharmaceutical industry has experienced outstanding growth in the 10 years leading up to 2015, consistently outperforming ... Read Full Answer >>
  5. Why is a shareholder rights plan called a "poison pill?"

    To avoid being the target of a hostile takeover by a larger firm, a corporate board might adopt a defensive strategy called ... Read Full Answer >>
  6. Is the banking sector a good choice for value investing?

    The banking sector is a good choice for value investing. Value investors look for stocks in which the market price does not ... Read Full Answer >>
Related Articles
  1. Professionals

    Quit Your Job To Trade Stocks?

    Ready to quit your day job and become a full-time trader? These tips will help you determine your area of expertise.
  2. Investing Basics

    The Roles Of Traders And Investors In The Marketplace

    Discover how these two groups work together to keep the market functioning properly.
  3. Investing Basics

    Paying Your Investment Advisor - Fees Or Commissions?

    The way a professional is compensated can affect quality of service. Learn more here.
  4. Investing

    Fee-Based Brokerage: Will They Work For You?

    Learn the pros and cons of this type of investing and whether it will work for you.
  5. Options & Futures

    Don't Let Brokerage Fees Undermine Your Returns

    Smart investors don't give away more money than necessary in commissions and fees. Find out how to save.
  6. Investing News

    Investing Early In The Future of Data Security

    Data breaches are becoming increasingly common. Among the foremost technologies paving the path for the future of data security is biometrics.
  7. Investing

    Three Portfolio Moves To Consider Now

    What portfolio moves should you consider making as the 2nd quarter kicks off? Before we focus on the future, let’s first reflect on the 1st Q surprises.
  8. Investing Basics

    Manage Investments And Modern Portfolio Theory

    Modern Portfolio Theory suggests a static allocation which could be detrimental in declining markets, making it necessary for continuous risk assessment. Downside risk protection may not be the ...
  9. Stock Analysis

    Why the House (and Las Vegas Sands) Always Wins

    An in depth look at how Las Vegas Sands became a multi-billion dollar company.
  10. Brokers

    Private Equity's Returns Are Tempered By Its Risks

    Private equity firms adopt approaches to quickly hike up earnings and boost returns, but these investments come with big risks too.

You May Also Like

Hot Definitions
  1. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  2. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  3. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  4. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  5. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  6. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
Trading Center