{"id":5199,"date":"2021-10-19T19:17:43","date_gmt":"2021-10-19T13:47:43","guid":{"rendered":"https:\/\/www.tickertape.in\/blog\/?p=5199"},"modified":"2022-05-24T19:05:51","modified_gmt":"2022-05-24T13:35:51","slug":"proprietary-trading","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/proprietary-trading\/","title":{"rendered":"What Is Proprietary Trading, How It Works And Things To Consider"},"content":{"rendered":"\n<p>Financial firms and institutions play an important role in <a href=\"https:\/\/www.tickertape.in\/blog\/how-to-invest-in-shares\/?utm_source=blog&amp;utm_medium=article\">stock market<\/a> trading, that in reality, hold much more sway over the markets than retail investors given the sheer size of their investment corpus. They mostly <a href=\"https:\/\/www.tickertape.in\/blog\/why-should-you-prioritise-investing\/\">invest<\/a> pooled capital (like <a href=\"https:\/\/www.tickertape.in\/blog\/mutual-funds\/\">mutual funds<\/a>) or invest on behalf of their clients (HNIs or corporates). But when financial firms trade for themselves, using their own money to generate profits for themselves, this is called proprietary trading.&nbsp;<\/p>\n\n\n\n<p>Let us understand this in detail.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/proprietary-trading\/#What-is-proprietary-trading\" title=\"What is proprietary trading?\">What is proprietary trading?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/proprietary-trading\/#Things-to-be-considered-by-proprietary-firms\" title=\"Things to be considered by proprietary firms\">Things to be considered by proprietary firms<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/proprietary-trading\/#Availability-of-the-funds\" title=\"Availability of the funds\">Availability of the funds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/proprietary-trading\/#Proper-use-of-trading-algorithm\" title=\"Proper use of trading algorithm\">Proper use of trading algorithm<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/blog\/proprietary-trading\/#Timely-position\" title=\"Timely position&nbsp;\">Timely position&nbsp;<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tickertape.in\/blog\/proprietary-trading\/#Taxability-of-proprietary-trading\" title=\"Taxability of proprietary trading\">Taxability of proprietary trading<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tickertape.in\/blog\/proprietary-trading\/#Top-proprietary-trading-firms-in-India\" title=\"Top proprietary trading firms in India\">Top proprietary trading firms in India<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\" id=\"what\"><span class=\"ez-toc-section\" id=\"What-is-proprietary-trading\"><\/span><strong>What is proprietary trading?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Proprietary trading refers to the trading of stocks, bonds, and different types of <a href=\"https:\/\/www.tickertape.in\/blog\/financial-instruments\/?utm_source=blog&amp;utm_medium=article\">financial securities<\/a> by investment banks, financial companies, brokers, and other commercial banks to generate gains for themselves. Here, the goal is to take advantage of market movements and earn profits for the self, and not to tangle for commission (for the trading of securities).<\/p>\n\n\n\n<p>Financial firms apply different strategies to generate high returns on investment often using technology-backed tools and software. Major strategies are arbitraging, such as statistical arbitrage, hedging, <a href=\"https:\/\/www.tickertape.in\/blog\/a-step-by-step-guide-to-fundamental-analysis\/\">fundamental analysis<\/a>, and advance arbitraging.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"things\"><span class=\"ez-toc-section\" id=\"Things-to-be-considered-by-proprietary-firms\"><\/span><strong>Things to be considered by proprietary firms<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In proprietary trading, an investor\u2019s role is played by the financial institutions, brokers, bankers, and other financial firms. Unlike primary businesses, these firms act as investors that trade in the <a href=\"https:\/\/www.tickertape.in\/blog\/how-to-invest-in-shares\/\">stock market<\/a> with the help of advanced models and algorithms they have access to. The investors or prop firms are required to consider different things related to the stock market trading. Some of these are:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Availability-of-the-funds\"><\/span><strong>Availability of the funds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Firms must have positive cash flow for investment. Note that they are not investing clients\u2019 or other investors\u2019 money, but their own money that they generate from business. A stable corpus can provide a greater chance to earn higher returns.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Proper-use-of-trading-algorithm\"><\/span><strong>Proper use of trading algorithm<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The brokers and the financial firms trading in the stock market would need the most high-tech and expensive of softwares as they trade with enormous capital. To avoid human emotion and their biases, the need of using <a href=\"https:\/\/www.tickertape.in\/blog\/algo-trading\/?utm_source=blog&amp;utm_medium=article\">algorithmic trading<\/a>\/machine-trading is magnified.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Timely-position\"><\/span><strong>Timely position&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>As these firms run high on money, their short and long-term positions also run high in numbers\/crs. A simple wrong trade can erode the capital of the concerned firm.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"taxability\"><span class=\"ez-toc-section\" id=\"Taxability-of-proprietary-trading\"><\/span><strong>Taxability of proprietary trading<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As prop trading involves trading in financial instruments and transactions, the taxability they share is the same as that of regular investments.<\/p>\n\n\n\n<p>Generally, the <a href=\"https:\/\/www.tickertape.in\/blog\/long-term-capital-gain-on-share\/?utm_source=blog&amp;utm_medium=article\">long-term capital gain<\/a> tax for holding assets after 12 mths is 10%, if the return exceeds the limit of Rs. 1 lakh. The <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-short-term-capital-gain-on-shares\/?utm_source=blog&amp;utm_medium=article\">short-term capital gain<\/a> is applied as 15%.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"top\"><span class=\"ez-toc-section\" id=\"Top-proprietary-trading-firms-in-India\"><\/span><strong>Top proprietary trading firms in India<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>Jaypee Capital Service Ltd.<\/li><li>Edelweiss Capital<\/li><li>Transmarket Group<\/li><li>Future First Info Service Pvt. Ltd.<\/li><li>Kredent Trading<\/li><li><a href=\"https:\/\/www.tickertape.in\/stocks\/smc-global-securities-SMC?&amp;utm_source=blog&amp;utm_medium=article\" target=\"_blank\" rel=\"noreferrer noopener\">SMC Global<\/a><\/li><\/ul>\n\n\n\n<p>These are some of the top proprietary trading firms in India, according to. These firms provide financial services to investors and other clients. The business model of these firms generates enough returns for their current as well as the future growth.<\/p>\n\n\n\n<p>Proprietary trading is when large financial institutions enter the market to trade and appreciate their own capital instead of investing on behalf of their clients. These firms employ high-tech and expensive softwares to achieve near-perfect company goals. All rules of investments remain the same for proprietary trading as with others though the level of risk may be magnified due to the enormous quantum of investment corpus.<\/p>\n\n\n\n<p><meta charset=\"utf-8\">There are other types of <a href=\"https:\/\/www.tickertape.in\/blog\/day-trading-strategies\/?utm_source=blog&amp;utm_medium=article\">trading strategies<\/a> as well, you can read more about similar topics on <a href=\"https:\/\/www.tickertape.in\/blog\/?utm_source=blog&amp;utm_medium=article\">Blog by Tickertape<\/a>. What better time to start investing&nbsp;than during the auspicious season of Diwali? Pick your stocks and start creating a wishlist for <a href=\"https:\/\/www.tickertape.in\/blog\/muhurat-trading-2021\/?utm_source=blog&amp;utm_medium=article&amp;utm_campaign=mtrad\">Muhurat Trading<\/a> session.&nbsp;Before investing in stocks blindly, conduct some research and check stocks on <a href=\"https:\/\/www.tickertape.in\/?utm_source=blog&amp;utm_medium=article\" target=\"_blank\" rel=\"noreferrer noopener\">Tickertape<\/a>.&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Want to know how proprietary trading works? Click here to know more about proprietary trading, its taxability, different strategies &#038; trading practices.<\/p>\n","protected":false},"author":54,"featured_media":4914,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"no","footnotes":""},"categories":[9,1760],"tags":[],"acf":[],"modified_by":"Aradhana Gotur","jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2021\/10\/6.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/5199"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/54"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=5199"}],"version-history":[{"count":5,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/5199\/revisions"}],"predecessor-version":[{"id":8723,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/5199\/revisions\/8723"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/4914"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=5199"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=5199"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=5199"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}