It is trading the proprietary money of the institution you work for. i.e. not customer money.
Generally push this through any market you choose. Great job, I did it for 4 years, and it offers great freedom if you make a good PnL but as with all trading you are only as good as your last trade.
A lot of the banks have prop desks and many of the funds employ prop traders. Persoanally I got into it after spending 3 years on a grad training scheme with cargill, trading commodities and then just applying to the right place at the right time. It is very difficult to get into and more often than not people get into it from other trading jobs. Generally you are paid a salary and then at the end of the year a percentage usually 8-15% of your net profits are calculated, your salary deducted and then you get what is left. If you have a crap year you still get your salary but you may not have a job.
I left because I had had a bad year and I had another offer to start up a trading business from scratch for another company.
I heard that the number of prop traders employed by the banks and the like was actually very low as the profits produced by a prop trading team were generally low (particularly when measured as a % of the institutions overall profits).
I'd be interested to know what kind of numbers are actually employed and what % of prop traders are actually profitable for the organisations they work for. Also, if they do actually make a considerable proportion of profit for institutions? Presumably they must make a decent return overall otherwise, where is the incenntive for the institutions to run prop trading operations when they can make good profits elsewhere on less risky operations?
IMHO - in order to get a prop trading job your best avenue is probably via a job in one fo the large fund management, IB front office or a US Multinational commodity businesses. I would be quite suprised if you could get straight into prop trading direct, although there must be exceptions. Actually some funds now automate a lot of what they trade and a trading job is actually an execution job. The really clever stuff is now done in the analysis and development departments.
As for the returns from prop desks, the problem with them is that they have proven fairly volatile but they have also shown phenomenal returns at times. The argument for any trading company to keep any desk is that if it has an acceptable risk/return and helps diversify overall risk you have got to have it.
I cannot provide you with any stats as I do not know them. Many hedge funds and CTA's are effectively prop traders and their results speak for themselves.