Where do you see this?
In news articles about financial institutions or in the earnings
reports of banks.
What does it mean?
When a bank, brokerage or other financial institution trades for
its own profit, this is known as proprietary trading. This is in
contrast to the bank trading on behalf of a customer, where it gets
a commission rather than a share of the profits.
Why is it important?
Proprietary trading is regarded as one of the principal causes of
the recent financial crisis.
Wall Street gaint Lehman Brothers was bankrupted by its
trading losses, and its counterparts also incurred huge losses.
This in turn disrupted the banking system and caused a liquidity
crunch, leading to the global crisis.
Just two weeks ago, America bank JPMorgan reported a trading
loss of US$2 billion (S$2.5 billion) or more.
While it is a relatively small amount, given the bank's
assets, the loss has angered shareholders and shaken equity
markets.
So you want to use the term. Just say...
"It is risky if a bank earns a large proportion of its profits
through proprietary trading."
invest, The Sunday Times, May 20, 2012, Pg 37