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Proprietary futures trading is a term used to describe the range of activities that constitute professional trading within a futures trading, financial management or investment banking firm. In the pure sense of the word, prop futures trading is where the individual uses the firms money to trade the markets. The trader is paid a salary or remuneration structure that comprises a base and/or profit share component. This is most common in an investment banking environment or company that uses traders to realize a return on its capital. Proprietary futures
trading is widely practiced in the
United States and throughout Europe. Many new hybrid business models
have evolved whereby the trader can participate in proprietary day
trading by joining a firm that specializes in trading. These firms
require the trader to put up an upfront deposit, undertake a training
program and then commence trading with your seed stake and additional
capital backed by the firm. In the US, traders are required to comply
with any regulatory or compliance requirements. In some cases, this can
involve taking a course and obtaining the required licenses.
The advantage to
proprietary futures trading is the
buying power afforded by gaining access to capital. Trading firms are
usually well capitalized and traders can use the firms capital to
realize superior returns. In some cases the commission structures are
also attractive as part of group buying power negotiated by the firm.
Working in a group environment can also provide the opportunity to
network and acquire new knowledge and approaches to trading the
markets. There are different
levels of training provided by these
firms. The less well managed companies do not provide a great deal of
trader support. In other companies, proprietary trader support can be
provided in the form of trading programs and access to mentoring or
support services. In some companies, new traders are inducted through a
comprehensive training program. This includes classroom instruction and
market practice via a simulator. Managers keep a watchful eye on
traders and monitor their progress. Examples of proprietary stock trading and prop futures trading firms include: Bright trading, Assent, ECHO Trade and Swift Trade. These companies operate predominantly in the United States. There are many other proprietary futures trading firms that operate throughout Europe and Asia. With global futures markets now a 24 hour trading reality, this industry is expected to grow in the years to come, facilitated by advances in technology and the movement of all exchanges to an electronic trading platform. Next Article: Foreign Stock Investing |
