Proprietary trading is a type of trading in which a firm or individual trades financial instruments using their own capital, rather than trading on behalf of clients. In proprietary trading, the trader is typically making trades for the purpose of generating profit for the firm or themselves, rather than executing trades for clients.
Proprietary trading can involve a range of financial instruments, including stocks, bonds, commodities, currencies, and derivatives. The traders may use various strategies to make profits, including fundamental analysis, technical analysis, quantitative analysis, and arbitrage.
In proprietary trading, firms and traders take on risk using their own capital, so the profits and losses are realized by them. This can make proprietary trading a highly competitive and potentially lucrative activity, but it also involves significant risk.
Regulations around proprietary trading vary by country, with some countries placing restrictions on the practice in order to protect consumers and prevent excessive risk-taking by financial firms.