The definition of proprietary trading, or " Prop trading " is activity whereby a company's traders trade equities, futures, or other products actively, using money staked by the firm instead of their own capital, or a client's money. In other words, the company takes on the risk and puts up the capital and margin money (also known as proprietary funds), and then takes any liability for losses on itself. Whenever there's profit from this kind of activity, the firm and the trader split the profits.