Regulatory changes are forcing firms at every point of the trade cycle to re-evaluate their business models. Proprietary trading houses are no exception, finds Galen Stops.
Proprietary trading firms have not been immune to the low
volumes and high compliance costs that are blighting much of
the industry, and over the past 18 months many have struggled.
This has lead to the consolidation within the market. ...
Getco buying Automat, Marex
Spectron acquiring Schneider Trading Associates and Webb
Traders merging with Caerus Trading are all recent examples of
However, with change also comes
opportunity for the prop shops. The Volcker Rule in the US and
moves to separate proprietary trading divisions from retail
banks in Europe will curtail proprietary trading at banks,
giving further prominence to traditional prop shops.
While this will reduce liquidity
in the short-term, the talent coming out of the banks will
provide significant opportunities for recruitment. But
short-term challenges abound for proprietary trading houses.
Rising technology costs are hitting margins, while lower
volumes are decreasing opportunities for traders.
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