What is a Proprietary Trading Terminal Desk ?
Proprietary Trading desk, means any person, a group of people, any bank or financial institute who invests their capital and earns profits and bears the losses on their investments. Proprietary Desk transactions are done through financial instruments such as stocks, bonds, currencies, and commodities, etc. Proprietary trading desks do not use their clients' money for these investments; instead, they invest their own money.
How does the Proprietary Trading Desk Work ?
A trading desk is a separate specialized department within a stockbroking entity or a financial institution consisting of multiple trading terminals managed by professional and experienced traders. Trading occurs when Proprietary traders conduct any transactions in various types of complex financial instruments and derivatives with an objective to earn a profit. The traders manning the trading terminals use a combination of their expertise, trading algorithms, and advanced technology like artificial intelligence to identify and take advantage of potentially profitable trading opportunities.
Proprietary Trading Terminal Desk uses different strategies like volatility arbitrage, merger arbitrage, statistical arbitrage, index arbitrage, fundamental and technical analysis and global macro-trading for personal gain. Though there are various financial instruments in which a trader can trade, Proprietary Desk traders prefer derivatives like futures and options over other financial instruments.
Advantages of Proprietary Trading Terminal Desk
The most important advantage of Proprietary Trading Desk is the quarterly and annual results in the form of profit. When any institute or bank makes any financial transactions on behalf of their customers, they receive a commission or fees. However in the Proprietary Trading Desk, The traders earn returns or incur losses since they are the ones investing their own money.
The banks or financial institutes can keep the inventory stocks for their future use. They may either speculate for their own benefit or sell to their clients.
If a bank or a firm deals in Proprietary Trading with a specific security, it can help in providing liquidity instantly by buying the security in bulk. They may influence the market by making large transactions of any specific asset. If the price of the security rises the firm makes a profit, otherwise, the firm has to bear huge losses.
Proprietary Trading Desk has access to advanced tools and software to predict the market and make accurate decisions. Small traders might not be privy to such research and tool based information and analysis.