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. 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. Broker

    1. An individual or firm that charges a fee or commission for ...
  6. Soft Dollars

    A means of paying brokerage firms for their services through ...
RELATED FAQS
  1. Which stocks in the industrial sector pay the highest dividends?

    In the industrial sector, some of the companies that pay the highest dividends include Highway Holdings Limited, OCI Partners ... Read Full Answer >>
  2. How big is the derivatives market?

    The derivatives market is, in a word, gigantic, often estimated at more that $1.2 quadrillion. Some market analysts estimate ... Read Full Answer >>
  3. How can I calculate the carrying value of a bond?

    The carrying value of a bond is the net amount between the bond’s face value and any unamortized premiums or minus any amortized ... Read Full Answer >>
  4. Besides stocks, what other asset classes can I invest in through ETFs?

    One of the main advantages of exchange-traded funds (ETFs) is that they offer investors the opportunity to invest in an extremely ... Read Full Answer >>
  5. How can I look up average banker's acceptance yields?

    Average banker's acceptance yields are published regularly in the Wall Street Journal and updated continuously on WSJ.com. ... Read Full Answer >>
  6. Are investments in the chemicals sector appropriate for ethical investors?

    Generally speaking, ethical investors shy away from chemical manufacturers and companies that have perceived negative chemical ... 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. Fundamental Analysis

    Tesla Home Batteries Could Transform Your Electric Bill

    With limited daylight hours, solar power cannot power our homes at night, but Tesla Motors might help solve that problem.
  7. Investing

    A Guide For Understanding Information Cascades

    We explain how information cascades work, how they relate to finance, and why they are important.
  8. Professionals

    Alternatives Need More Education, Not Enforcement

    While disclosures and investor education need improvement, alternatives provide a valuable way to increase yield and hedge against declines.
  9. Mutual Funds & ETFs

    Top 4 ETFs That Will Help Diversify Your Portfolio

    Seeking low cost diversification to high quality stocks and bonds? Consider these 4 ETFs.
  10. Technical Indicators

    6 Stocks for Millennials (or Anyone)

    Savvy Millennial investors looking for long-term winners should take a look at these stocks.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center