How Prop trading benefit to the economy?

[kaillra]

Hey guys,

This is my first post and english isn't my native language so don't be rude... So earlier today, I met my friend and we talked about our respective plan after graduating next summer. I told him I want to work for a prop trading firm.

And his first reaction was : "Oh so you want to manage other people money ?"
Me : "Not really, in fact you just use the firm's capital to trade and your goal is to make more money. And you don't have any clients."
Friend : To be honest, it looks like prop trading doesn't had any value to the economy!
Me : speechless :idea:

But after giving some thought, I guess traders add liquidity to the market which is necessary for a well functionning financial system. But how would you guys respond to this?

 

[Hotch]

Well you're right on liquidity. The general role of traders is to keep the market in line. So that good countries/companies get money to use efficiently, which gets taken away from bad companies which are using it inefficiently.

 

[Chartsy]

speculation clearly causes problems for commodity markets!
that said if you're a good prop trader and you make lots you're paying some decent revenue in tax anyway, not to mention your trading provides jobs for dealers,brokers etc...not to mention those who sell software to traders and the jobs there, the programmers, analysts....

 

[kaillra]

Thanks everyone for your insights, really appreciated. Next time, I will know what to answer!