Just a quickie today as I was out late last night and I only have a few minutes before my plane boards (waiting in the fantastic Porter lounge in the Toronto City Centre Airport – I love flying Porter!).
The term “prop trader” is short for “proprietary trader”. A proprietary trader is essentially just a trader who uses the firm’s capital instead of the firm’s clients’ capital when conducting trading activities (which can be trading stocks, bonds, commodities, derivatives, you name it). Prop traders are designed to be stand-alone profit centres for a firm.
There have been a number of prop traders who have blown themselves up (as well as their firms in some cases) such as Nick Leeson who took down the entire Barings Bank.