Proprietary trading, commonly known as "prop trading," has transformed dramatically over the past decades. It has gone from a mere brick-and-mortar practice where traders are physically required to visit the bank to conduct trade to an exclusive Wall Street club practice and is now a global and widespread opportunity for everyone who wishes to grow their capital.

This article will briefly explore the exciting revolution of props trading and how props firms must learn to seize the increasing opportunities from the cryptocurrency industry with the help of payment solution partners like BoomFi.

Prop Trading: A Brief Revolution

Tldr of Proprietary Trading:

Prop trading is when a financial institution or firm utilizes its funds instead of client funds to trade in the market, aiming for corporate profits rather than managing trades for clients.

Rather than managing client investments, a proprietary trading firm engages its capital to trade various assets such as stocks, bonds, and currencies. This model places risks and rewards solely on the firm, allowing it to reap all potential profits. These firms may employ high-frequency trading, arbitrage, or taking calculated positions based on market trends to generate returns.

Brief History:

Proprietary trading can be traced back to the early days of the stock market. During the mid-20th century, it was not unknown for financial institutions to trade financial instruments with their capital. However, it was in the 1980s that the proprietary trading sector finally emerged. This time was characterized by considerable deregulation in the American financial markets, particularly with the repealing of the Glass-Steagall Act. This change allowed banks to participate in riskier trading practices.

Consequently, numerous Wall Street proprietary trading firms were created, leveraging the capital of larger financial institutions to invest across multiple markets. The wake of the 2008 financial crisis resulted in regulatory reforms such as the Dodd-Frank Act, creating stricter regulations for banks. Thus, these regulatory changes led to further growth of independent prop trading firms not subject to these rules.

Modern Prop Trading

The internet has enabled prop trading firms to access traders' skills globally. Today, these firms typically offer challenges or a demo account to prospective traders to showcase their abilities, granting substantial capital to those who succeed. This development has revolutionized the industry by creating new income opportunities and educating millions about capital markets.

Decentralized digital assets enter the Prop Trading

The Forex (FX) market has established itself as the number one sector within prop trading, attracting the most frequent trades from retail investors. But there is a paradigm shift over the horizon.

As the world is gearing toward the benefits of blockchain and the growing acceptance of decentralized digital assets, prop trading firms have also started recognizing the value of stablecoins and cryptocurrencies as tradeable assets. With features like being 24/7 tradeable, highly speculative, and global & decentralization, pretty much similar if not even better than FX, cryptocurrency is the only natural next step for the prop trading industry moving forward.

Why do Prop firms need crypto payment?

The competition in the trading industry is cutthroat. Tapping into crypto payment rails is no longer a technological novelty but more of a strategic decision to remain competitive.

Enhanced Transactions

Crypto payments enable instant, cost-effective cross-border transfers, effectively addressing the inefficiencies of traditional systems, which often involve intermediaries, high fees, and delays. When time is of the uttermost importance,  even more so for trading, this gives firms a significant edge.

Cost Efficiency  

Transaction fees in the incumbent payment system can be costly. Traditional wire transfers and credit card payments often incur fees ranging from 2% to 5%, which usually cuts into the firm's profit margin. Crypto transactions are known for their low cost and are even significantly lower for high-volume transactions. Thus, it is almost a no-brainer for firms to embrace crypto payment.

Appealing to a Global Clientele and Talents

Prop trading firms frequently face significant rivalry in securing clients and talented traders. By providing crypto payment solutions, these firms can cater to individuals who prefer digital currencies, broadening their client portfolio and options for traders. Having crypto rail can allow firms to structure more attractive compensation structures. For example, firms can provide profit-sharing bonuses in stablecoins or facilitate direct investment opportunities in digital assets, giving traders more financial flexibility and incentives to trade better. This approach not only creates new revenue opportunities but also bolsters the firm's global footprint.

Improved Liquidity Management

Liquidity is quintessential to the operation of prop trading firms. Cryptocurrency payment can streamline the firm's cash flow by offering instant settlement. Leveraging crypto payment allows firms to hold stablecoins, which can help reduce liquidity risk by overexposing to other cryptocurrencies. In addition, firms can access innovative DeFi solutions to earn yield on idle crypto assets, further optimizing liquidity management.

BoomFi and Crypto Prop Trading Ecosystem

BoomFi has established itself as a key partner in the proprietary trading ecosystem by offering accessible, secure, and efficient crypto payment solutions. Through our collaboration with Paymid, a leading payment orchestrator, we have seamlessly integrated crypto-payment capabilities into the operations of industry leaders, including QuantTekel. This integration allows our partners to effortlessly accept and provide crypto payments, enhancing their ability to meet their clients' evolving demands.

Let’s find out why QuantTekel chose BoomFi as their Crypto Payment partner:  

User-friendly product experience

BoomFi delivers a seamless and user-friendly product experience that is particularly beneficial for proprietary trading firms. These firms often require efficient and intuitive tools to support their clients' trading strategies and decision-making processes. With BoomFi, the integration into their existing operations is smooth and hassle-free, minimizing the learning curve for Quant Tekel's new users and ultimately contributing to a more effective trading environment. 

Cost-effective solution

BoomFi provides a zero-fee structure, enabling QuantTekel to utilize secure and reliable cryptocurrency payment services without additional costs. By eliminating these extra expenses, BoomFi ensures that partners like QuantTekel can focus resources on growth rather than transaction fees and enjoy our crypto payment solutions with greater financial efficiency and flexibility.

Superb customer support

BoomFi’s commitment to providing quick and responsive support ensures that questions or issues are resolved instantly.  By having a responsive support system in place, BoomFi empowers QuantTekel to maximize productivity and focus on what they do best, ultimately enhancing their overall performance and success.

Excited enough? You can always start to empower your payment system right today with BoomFi 👇