Proprietary trading stands at a crossroads with the rise and rise of electronic trading but where next?
Cost, technology and adaptability remain
key to prop traders’ operations in the modern
Proprietary trader has evolved over recent
years as market participants have been forced to come to terms
with cost pressures, impending regulatory changes and the
still-increasing adoption of electronic trading. But what have
these requirements meant for proprietary trading as a whole,
and what’s next for this unique market?
The trading lifecycle presents many real
cost pressures for firms, from mandatory clearing and trade
reporting to legal needs and paying the traders themselves.
But the advent of electronic trading and
its monopolisation of the market has forced firms to
dramatically increase their technology spending if they want to
Beyond technology requirements, prop
traders are facing other cost challenges. Often such firms rely
on one revenue stream - trading - so when trading margins are
squeezed, the affect can be seen across the business. At such
times, costs must be passed on to clients, which has the
potential to hurt ongoing business and deter potential new
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