Proprietary trading (also known as prop trading) occurs when a trader trades

stock Stocks (also capital stock, or sometimes interchangeably, shares) consist of all the Share (finance), shares by which ownership of a corporation or company is divided. A single share of the stock means fractional ownership of the corporatio ...

bond Bond or bonds may refer to: Common meanings * Bond (finance), a type of debt security * Bail bond, a commercial third-party guarantor of surety bonds in the United States * Fidelity bond, a type of insurance policy for employers * Chemical bond, t ...

currencies A currency is a standardization of money in any form, in use or currency in circulation, circulation as a medium of exchange, for example banknotes and coins. A more general definition is that a currency is a ''system of money'' in common use wi ...

commodities In economics, a commodity is an economic good, usually a resource, that specifically has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. Th ...

, their derivatives, or other financial instruments with the firm's own money (instead of using customer funds) to make a profit for itself. Proprietary traders may use a variety of strategies such as

index arbitrage Index arbitrage is a subset of statistical arbitrage focusing on index components. An index (such as S&P 500) is made up of several components (in the case of the S&P 500, 500 large US stocks picked by S&P to represent the US market), and the va ...

statistical arbitrage In finance, statistical arbitrage (often abbreviated as Stat Arb or StatArb) is a class of short-term financial trading strategies that employ Mean reversion (finance), mean reversion models involving broadly diversified portfolios of securities (h ...

merger arbitrage Risk arbitrage, also known as merger arbitrage, is an investment strategy that speculates on the successful completion of mergers and acquisitions. An investor that employs this strategy is known as an arbitrageur. Risk arbitrage is a type of eve ...

fundamental analysis Fundamental analysis, in accounting and finance, is the analysis of a business's financial statements (usually to analyze the business's assets, Liability (financial accounting), liabilities, and earnings); health; Competition, competitors and Ma ...

volatility arbitrage In finance, volatility arbitrage (or vol arb) is a term for financial arbitrage techniques directly dependent and based on volatility. A common type of vol arb is type of statistical arbitrage that is implemented by trading a delta neutral po ...

, or

global macro Global macro is an investment strategy that leverages Macroeconomics, macroeconomic and Geopolitics, geopolitical data to analyze and predict moves in Financial market, financial markets. Large-scale or "wiktionary:macro, macro" political and econ ...

trading, much like a

hedge fund A hedge fund is a Pooling (resource management), pooled investment fund that holds Market liquidity, liquid assets and that makes use of complex trader (finance), trading and risk management techniques to aim to improve investment performance and ...

Famous traders

Trader

Nick Leeson Nicholas William Leeson (born 25 February 1967) is an English former derivatives trader whose fraudulent, unauthorised and speculative trades resulted in the 1995 collapse of Barings Bank, the United Kingdom's oldest existing merchant bank ...

took down

Barings Bank Barings Bank was a British merchant bank based in London. It was one of England's oldest merchant banks after Berenberg Bank, Barings' close collaborator and German representative. It was founded in 1762 by Francis Baring, a British-born member ...

with unauthorized proprietary positions. UBS trader

Kweku Adoboli Kweku Adoboli (born 21 May 1980) is a Ghanaian investment manager and former stock trader. He was convicted of illegally trading away US$2 billion (£1.3 billion GBP) as a trader for Swiss investment bank UBS. While at the bank he pri ...

lost $2.3 billion of the bank's money and was convicted for his actions.

Armin S Armin S. (complete name unknown, born ) is a German independent securities trader. He achieved international recognition in 2017 when he filed a lawsuit against BNP Paribas for its continued refusal to deliver €163 million in securities he had ...

, a German private trader, sued

BNP Paribas BNP Paribas (; sometimes referred to as BNPP or BNP) is a French multinational universal bank and financial services holding company headquartered in Paris. It was founded in 2000 from the merger of two of France's foremost financial instituti ...

for 152m EUR because they sold to him

structured product A structured product, also known as a market-linked investment, is a pre-packaged structured finance investment strategy based on a single security, a basket of securities, options, indices, commodities, debt issuance or foreign currencies, an ...

s for 108 EUR each which were worth 54 00 EUR.

Notable proprietary trading firms

Akuna Capital Akuna Capital is an American proprietary trading firm headquartered in Chicago. It has additional offices in London, Shanghai, and Sydney. Background Akuna Capital was co-founded by Andrew Killion in 2011 in Chicago. Killion was previously a ...

Citadel Securities Citadel Securities LLC is an American market making firm headquartered in Miami, Florida. It provides liquidity and trade execution to retail and institutional clients. The firm also trades futures, equities, credit, options, currencies, a ...

DRW Trading Group DRW Holdings, LLC, typically referred to as DRW, is a proprietary trading firm based in Chicago. The firm was founded in 1992 by Don Wilson, an options trader at the Chicago Mercantile Exchange, and was named after his initials: DRW. The firm tra ...

Flow Traders Flow Traders is a proprietary trading firm. A market maker, it provides liquidity in the securities market by using high frequency and quantitative trading strategies. Originally founded in Amsterdam, Flow Traders also has offices in New York, ...

Global Trading Systems Global Trading Systems, which uses the trade name GTS, is an American proprietary trading and market making firm headquartered in New York. The firm accounts for 3 to 5 percent of the daily turnover of US equities and has handled over 250 IPO ...

Headlands Technologies Headlands Technologies (Headlands) is an American quantitative proprietary trading firm headquartered in Chicago. It has additional offices in New York, Austin, Amsterdam, and Singapore. Background Headlands was founded in July 2009 by three f ...

Hudson River Trading Hudson River Trading is an American quantitative trading firm headquartered in New York City and founded in 2002. In 2014, it accounted for about 5% of all trading in the United States. Hudson River Trading employs over 800 people in offices aro ...

IMC Financial Markets IMC Financial Markets, sometimes referred to as IMC Trading, is a proprietary trading firm and market maker for various financial instruments listed on exchanges throughout the world. Founded in 1989 as International Market makers Combination, t ...

Jane Street Capital Jane Street Capital is an American proprietary trading firm headquartered in New York City. It employs more than 2,600 people in six offices in New York City, London, Hong Kong, Amsterdam, Chicago, and Singapore, and trades a broad range of asset ...

Jump Trading Jump Trading LLC is a proprietary trading firm with a focus on algorithmic and high-frequency trading strategies. The firm has over 1500 employees in Chicago, New York, Austin, London, Tel Aviv, Singapore, Shanghai, Bristol, Gurgaon, Gandhinagar, ...

Optiver Optiver Holding B.V. is a proprietary trading firm and market maker for various exchange-listed financial instruments. Its name derives from the Dutch , or " option trader". The company is privately owned. Optiver trades listed derivatives, cash ...

* PEAK6 *

Quantlab Quantlab is an American quantitative proprietary trading firm headquartered in Houston, Houston, Texas. It has additional offices in New York City, New York, Chicago, Boston, Austin, Texas, Austin, Denver and Singapore. Background Quantlab wa ...

Radix Trading Radix Trading is an American proprietary trading firm headquartered in Chicago. It has additional offices in New York and Amsterdam. Background Radix Trading was co-founded by Benjamin Blander and Michael Rauchman. Blander was previously head ...

Susquehanna International Group Susquehanna International Group, LLP (SIG) is a privately held, global trading and technology firm. SIG comprises a number of affiliated entities specializing in trading and proprietary investments in equities, fixed income, energy, commodity, i ...

Tibra Tibra Capital (Tibra) is an Australia proprietary trading firm headquartered in Austinmer, New South Wales. It has additional offices in Sydney and London. Background Tibra was founded in January 2006 near Sydney by Dinesh Bhandari, a former t ...

* Tower Research *

Tradebot Tradebot Systems, Inc. is a high-frequency equity trading firm in the US. Based in Kansas City, Missouri, they regularly account for 5% of the total trading volume in the US stock market. According to the founder, Dave Cummings, as of 2008, the ...

TransMarket Group TransMarket Group (TMG) is a privately held quantitative proprietary trading firm based in Chicago with additional offices in Puerto Rico and Switzerland. Description TMG was founded in 1980 by Ray Cahnman, a former floor trader, and has roughl ...

Virtu Financial Virtu Financial, Inc. is an American high-frequency trading company. The company went public on the Nasdaq in 2015. Organization Based in New York City, Virtu was founded by Vincent Viola, a former chairman of the New York Mercantile Exchange ...

XTX Markets XTX Markets Limited is a British algorithmic trading company based in London. It was founded in January 2015 by Alexander Gerko, who is currently co-CEO alongside Hans Buehler. The company employs over 250 people globally (as of 2024) and uses ...

References

{{Authority control Financial markets

Famous traders

Notable proprietary trading firms

See also

References