Why stock broking companies are allowed to run trading desks?


#1

Employees working in investment banking are not allowed to invest in stock market .
Business news channel hosts are not allowed too.
Also, recently government restricted e-commerce companies selling their own products.

Then why brokerage firms are allowed to run trading desks and exploit their users information?


#2

Any thoughts please?


#3

A stockbroker trading in the markets is akin to a real estate broker buying and selling properties on his own account. The argument you are making is that the real estate broker will know which localities will demand a premium property rate in the future based on the transactions his clients have made. The real estate broker might be in a position to make better decisions because he has seen more properties but his decisions need not always make him a profit. Further, the transactions of the real estate broker’s clients have little bearing on how he views the property markets. Similarly, a stockbroker when trading on the stockmarkets is influenced by his views on the market. A stockbroker will not be able to foresee which client will make money in the future or which ones won’t. So, instead of betting on a clients position to go in either direction he would rather focus his judgement on the markets as his clients would too. If you had access to all your friends trades for the next year, who would you copy? It isn’t guaranteed that the ones who made money in the past will make money in the next year.


#4

Although I don’t think so prop trading alone can break your trades especially positional (not sure about intraday).

Answer to your question which friend you would copy. Broker also has your pnl statement so you over time know which one works.


#5

I am not quite sure why wouldn’t they be allowed to run trading desks in a first place? They are just executing your trades and I am not sure how they can use any of trading information to get sort of inside info benefit in order for trading desk to be forbidden