Long Term Proprietary Trading Desk
Apart from the last two proprietary desks, the long term desk is about taking long term positions of four to ten years. Both technical and fundamental traders sit at that desk. They will agree on a viable trading or investment strategy that works.
Though, it seems like the pressure is lesser in this case, the reality is different. The long term proprietary desk, believe it or not usually causes more losses to the investment banks than any other desk.
Suppose that a long term desk has taken a multi-million-dollar position in silver because of their in-depth due diligence.
Initially everything was smooth and rosy. They keep adding to their positions until one day, they realized that they must close those gigantic bullish positions before it is too late. A long term proprietary trading desk is often forced to take heavy losses due to the unexpected changes in the financial markets.
Usually, those positions are not close straightaway because of their seize. Initially, defensive measures are deployed to safely protect the positions. There are also worries that other competitors may know about the issues, and initiate contrarians positions that will force the desk to take losses.
The long term proprietary desks are traditional trading desks because most investment banks that dare to risk their own
money often hold financial instruments for long term purposes. However, due to the advanced of trading technologies and software, banks begin to adopt a short term investment or trading approaches that are highly speculative.
Instant HFT Proprietary Trading Desk
After the 2008 financial crisis and fall of the gigantic Lehman Brothers global financial firm, investment banks proprietary
traders have been vilified and sacked. The banks do no longer have stronger balance sheets, and need more help more
than ever before from the central banks such as the Federal Reserve, ECB, Bank of England and Japan.
For those reasons, the traditional proprietary trading desks are replaced by trading software or algorithmic trading tools. Human beings are no longer needed because they make too many mistakes. They are forgetful, lazy, costly, sleepy and slow in contrast to the trading computers. Due to those reasons, a new proprietary trading desk has been created. The new desk is the HFT proprietary trading desk.
HFT stands for High Frequency Trading. We are talking about nano second, a split of second, far less than a minute
financial markets transaction that is executed by a computer at the fastest speed ever seen in the financial markets.
Apart from those unprecedented fast trades, the number of trades have exponentially increased. All are done by trading
algorithms and few human beings that sit in from of those computers. There are no more recurrent salaries to pay to
hundreds of employees. As long as the HFT is funded on a robust market principle.
This is the new age of HFT proprietary trading firms
that has completely changed the game of proprietary trading. As more profit are made by the traditional investment banks,
retail banking sector also joins the race of the fast money making proprietary high frequency trading desk.
Yes, they are using their own money because why should one only rely on fees and commissions at a time when it is possible to make real millions of dollars in one hour at the push of button on a trading computer.
Welcome to the wild wild west of the proprietary trading, Those desks can be highly lucrative but also speculative to point of wiping out a bank balance sheet if not in steady hands.
Traditional proprietary trading was about trading with banks own money instead of relying only on clients fees and commissions. Today the map of the proprietary trading has dramatically changed. The risk-reward ratio of a proprietary
trading desk has exponentially increased.
Though, some banks have made vast amount of profit, others have lost their shirt.
Nevertheless, the proprietary trading is here to stay. The game will never be the same again because of the new proprietary trading tools that are deployed in the financial markets. After all, one question remains. Should a retail banking player plays with its depositories' money in the financial markets just because of greed?
How much money should those proprietary trading firms expose to risks? Finally, should the tax payers bail out private banks that are using in-house proprietary tools? Others also wonder if an individual or retail trader should build his or her own proprietary trading strategy?
Well, this is the end of this article of the proprietary trading. I will be back soon exploring other aspects of the proprietary
trading. Please stay tuned and be ready for more. I hope this article has opened your understanding of the different types of proprietary tradings. If that is real, feel free to share this article on the social medial. Thank you for visiting today.
This article is written by George Beaulieu