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Proprietary trading (also known as prop trading) occurs when a trader trades stocks, bonds, currencies, commodities, their derivatives, or other financial instruments with the firm's own money (instead of using customer funds) to make a profit for itself.
The Volcker Rule was first publicly endorsed by President Obama on January 21, 2010. [16] The proposal was to specifically prohibit a bank or institution that owns a bank from engaging in proprietary trading, and from owning or investing in a hedge fund or private equity fund, and also to limit the liabilities that the largest banks could hold. [17]
In the US, The Securities and Exchange Commission oversees principal trading at registered advisors and funds for compliance with Investment Company Act of 1940 [Section 17(a)] and with the Investment Advisers Act [Section 206(3)]. The SEC can take enforcement action if it suspects improper activities or lack of appropriate disclosures. [2]
Stock traders can trade on their own account, called proprietary trading or self-directed trading, or through an agent authorized to buy and sell on the owner's behalf. That agent is referred to as a stockbroker. Agents are paid a commission for performing the trade. Proprietary or self-directed traders who use online brokerages (e.g., Fidelity ...
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Banks also undertake risk through proprietary trading (though this is subject to regulation within the US and certain European markets), done by a special set of traders who do not interface with clients and through "principal risk", risk undertaken by a trader after he buys or sells a product to a client and does not hedge his total exposure.
Jump Trading LLC is a proprietary trading firm with a focus on algorithmic and high-frequency trading strategies. The firm has over 700 employees in Chicago, New York, Austin, London, Tel Aviv, Singapore, Shanghai, Bristol, Gurgaon, Gandhinagar, Sydney, Amsterdam, Hong Kong, and Paris and is active in futures, options, cryptocurrency, and equities markets worldwide.
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