Proprietary trading involves a financial firm trading securities or other financial instruments with its own money, rather than on behalf of clients. Firms engage in proprietary trading to generate direct profits from market movements, taking on risk with their own capital. This activity can involve various strategies, including arbitrage, market making, and directional bets. It is distinct from client-facing brokerage or asset management services.
Context
In the cryptocurrency markets, proprietary trading is a significant activity, with many large trading firms and hedge funds employing sophisticated algorithms to profit from digital asset volatility and market inefficiencies. News often reports on the impact of these firms’ activities on market liquidity, price discovery, and overall market structure.
The judicial ruling restores the critical trader/dealer distinction, preserving operational flexibility and avoiding onerous capital requirements for market makers.
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