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AN INSIGHT
TO DAY TRADING

5 INFLUENTIAL PROP TRADING FIRMS


In proprietary trading firms, traders are buying and selling securities with the companies own money to make profits – they are not directly depended on clients. There are two main types of trading, the directional where the trader aims to profit from actual price changes in the security, and the market making where the trader acts as both – buyer and seller of the security.


Prop trading exists in various company forms and mostly takes on the role of a market maker. Some companies have their own trading departments like hedge funds, asset management firms or large commodities companies, however, there are also independent trading companies that exclusively focus on short-term trading the financial markets. When referring to the term “prop trading firm” those independent trading companies are usually subject of the matter.



JUMP TRADING

Jump Trading was founded in 1999 by two former pit traders, Paul Gurinas and Bill Disomma who initially met at the Chicago Mercantile Exchange. Today, Jump Trading is a proprietary trading firm that focuses on algorithmic and high-frequency trading strategies. The company has over 700 employees allocated to their offices in New York, Chicago, Amsterdam, London, Shanghai, and Singapore. They are globally active in futures, options, cryptocurrency, and equities markets.


Further, Jump Trading is a member of the Principal Traders Group, an advisory group formed by the Futures Industry Association with the aim to represent principal traders like independent proprietary trading firms that trade only on their own accounts. The company is a registered broker-dealer and member of multiple exchanges including the CME Group and the New York Stock Exchange. They are also member of most European exchanges including Eurex and the London Stock Exchange.



JANE STREET

Jane Street was founded in 2000 by Tim Reynolds and three other initiators. Today, the company has around 1,200 employees and developed to one of the world’s largest market-makers while trading more than $17 trillion worth of securities in 2020.


Jane Street represents a quantitative trading firm with a unique focus on technology and collaborative problem solving. Early, the company implemented the programming language OCaml which also allowed traders that were no actual programmers to verify and follow the respective trading algorithms. That implementation enabled the firm quickly adapting to changing market conditions while moving from algorithm prototypes to effective trading systems. Also, Jane Street underlined the collaborative approach by sharing some of their open source code on GitHub.



HUDSON RIVER TRADING

Hudson River Trading is a quantitative trading firm headquartered in New York City. It was founded by MIT graduates Jason Carroll, Suhas Daftuar and Alex Morcos in 2002. That time trading the financial markets was still dominated by manual operators. The company leveraged the power of technology and implemented their own algorithm leading to big success. In the further course, the Hudson River Trading expanded their trading from US equities to a global and multi-asset trading firm. As a result, it accounted for about 5% of all trading in the United States in 2014. The same year, the company and three other quantitative trading firms formed the Modern Markets Initiative which represents a trade lobbying group while becoming a leading voice for fair and open markets. Today, the company has over 700 employees and nearly trades on all electronic markets globally.



OPTIVER

Optiver was founded by Johann Kaemingk in 1986. The company started with a single trader on the options trading floor in Amsterdam, Netherlands where also their headquarter is located. Optiver’s initial purpose was to act as a market maker in options at the European Options Exchange which now became the Euronext.


Today, has the company has over 1100 employees and maintains offices in Amsterdam, London, Chicago, Shanghai and Sydney. They developed to a full proprietary trading firm while still holding their market maker position for various exchange listed instruments such as equities, funds, bonds and foreign exchange.


Further, Optiver is a member of the European Principal Traders Association in Europe, the FIA Principal Trading Group in the United States as well as the FIA in Japan.



TOWER RESEARCH CAPITAL

Tower Research Capital was founded by Mark Gorton in 1998 and is one of the oldest automated trading firms. The company has its headquarter in New York, USA and leverages technology and deploys diverse quantitative trading strategies across a broad range of asset classes in the global financial markets. Their engineering team represents the heart of the company constantly optimising their trading platform and approaches which includes all elements of the trading from computerised market analysis to automated order execution and risk management.


In 2019 Albert An took over the responsibility as the CEO. Today, Tower Research Capital has around 1000 employees in its global staff and is known as a company that has built a trading platform that is among the fastest and most sophisticated in the world.



CONCLUSION

Most of the today’s influential proprietary trading firms are active in the field of high-frequency trading. Even though those companies are trading the markets per definition, automated technology is the driving force in their approach. They predominantly apply quantitative trading strategies based on individually programmed algorithms. On average those prop firms have around 1000 employees where a large number is specialised in coding and software development. Finally, it can clearly be stated the dominance of computer directed trading has significantly increased since the 2000s and is dominating the financial markets today.