Prop trading firms, short for proprietary trading firms, operate on a unique business model that differs significantly from traditional investment firms. Revenue through Market MakingOne of the key strategies employed by prop trading firms is market making. Trading Strategies and AlgorithmsProp trading firms often develop complex algorithms to find and execute trades. Prop trading firms, while not banks, still must navigate a complex web of financial regulations designed to promote transparency and reduce systemic risk. In conclusion, proprietary trading firms make money by utilizing their capital to trade and by taking calculated risks.

Source: The Hindu November 11, 2023 11:21 UTC