J.P. Morgan has just announced that they will no longer engage in proprietary trading. Smart move. Proprietary trading is a zero sum game and unless your traders are smarter than Goldman Sachs traders (highly unlikely), then get out of the game. Also, if everybody gets out of the game, then Goldman Sachs has no counterparty to screw and that has to be a good thing.
No Proprietary Trading
- Thread starter Rockslinger
- Start date
There will always be counterparties to trade/screw with. Institutional investors, etc.
Prop trading is very lucrative when it goes well.
But the risks are large, and have resulted in big fluctuations in the banks' overall profit.Some of the Canadian banks have already restricted or eliminated their prop trading, in order to focus on more sustainable business. (They still trade for other functions like market making, arbitrage, and hedging risks, but they have a specific need for those market activities.)
