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Phillip Capital's Laura Chia (Head of Client Services) - Ask Me Anything (AMA)

  #11 (permalink)

Chicago IL
Trading Experience: None
Platform: All platforms
Broker/Data: Phillip Capital
Favorite Futures: All types
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Posts: 3 since Aug 2017
Thanks: 4 given, 4 received

IS prop trading an issue?

sujiroy View Post
The session was very informative, Thanks a ton for arranging it Mike.

Is prop trading such a big issue? Wouldn't most companies be engaging in some kind of prop trading?

Hi this is a great question. I am Lynette and I will answer this question. Why is prop trading an issue?

Prop trading itself is not an issue, but it could potentially lead to conflicts of interests when firms have both prop trading as well as brokerage business i.e. serving customer business itself. The goals of prop trading vs the goals of serving customers are different; for prop trading, you make money from trading the firms money/capital and for brokerage business, you make money from servicing your customers.

There’s fear from some investors/regulators when companies engage in both customer business and prop trading as there’s a possibility that some companies may not manage their risks or conflicts of interest well, which in turn, may lead to all sorts of trouble like front-running (making the trade ahead of the client in order to profit ); use the trading information of the client, in some form, to trade ; or (in a small number of cases) take big bets against the market with company's capital at the expense of protecting the best interests of their customers. One has to one has to understand those risks & conflicts in order to manage it well.

RISK DISCLAIMER: Trading in futures products entails significant risks of loss which must be understood prior to trading and may not be appropriate for all investors. Past performance of actual trades or strategies cited herein is not necessarily indicative of future performance. The information contained herein is provided to you for information only and believed to be drawn from reliable sources but cannot be guaranteed; Phillip Capital Inc. assumes no responsibility for errors or omissions. The views and opinions expressed in this letter are those of the author and do not reflect the views of Phillip Capital Inc. or its staff.
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