Friday, September 9, 2011

(ADP) Barings - agency trading outweights prop trading

Most futures dealers (Barings bank etc) don't allow their traders to initiate a trade without client request. Basically forbids prop trading. Prop trading (using Barings' own money) was too dangerous and destroyed Barings.

Barings (or any other broker, dealer) is an exchange member and sponsors client's trades. All non-members must engage a member to trade on any exchange including NYSE.

Futures market is mostly driven by client-request -> sponsor.

Muni market is similar -- client-request -> dealer.

In both cases, the bank takes positions and risks. Now I feel some stock brokers do the same.

SIMEX disallows members to finance client's margin account.

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