What is proprietary trading

Proprietary trading i.S. of the KWG

Proprietary trading i.S. of the KWG is a financial service i.S. of the KWG, which according to § 1 Ia 2 No. 4 KWG the following activities has as its subject:
a) the continuous offering of the purchase or sale of financial instruments at self-set prices and for their own account using their own capital (market maker),
b) frequent organized and systematic trading for own account to a considerable extent outside of an organized market or a multilateral or organized trading system (trading system as defined by the KWG, multilateral), if systematic internationalization is carried out, i.e. when customer orders outside a regulated market or a multilateral or organized trading facility without a multilateral trading facility being operated,
c) the acquisition and sale of financial instruments for one's own account as a service for third parties,
d) the operation of high-frequency trading, i.e. the purchase or sale of financial instruments for one's own account as a direct or indirect participant in a domestic organized market or a multilateral or
organized trading system by means of a high-frequency algorithmic trading technique, which is characterized by certain features, even without a service being available for others.

Trading in securities and other financial instruments is one of the following Categories to be assigned:
a) trading in a third-party name for third-party account (open representation) is a financial service within the meaning of of § 1 Ia 2 No. 2 KWG (contract brokerage); if the open representation takes place in the context of a placement transaction, it is instead a financial service within the meaning of of Section 1 Ia 2 No. 1c KWG (placement business);
b) trading in one's own name for third-party account (hidden representation) is banking within the meaning of the of § 1 I 2 No. 4 KWG (finance commission business);
c) Trading in your own name for your own account is (if it is to be understood as a service for others) as a financial service within the meaning of of Section 1 Ia 2 No. 4 KWG (proprietary trading within the meaning of the KWG). When trading on behalf of a customer as a proprietary trader, the institute does not act as a commission agent, but as a buyer or seller. Even if this is a purchase under civil law, the business service i.S. of the Financial Market Directive (Directive 2004/39 / EC). If proprietary trading i.S. of the KWG on a commercial basis or to an extent that requires a commercially established business operation, regardless of the legal form of the company (natural person, partnership, legal person) - written permission from the Federal Financial Supervisory Authority (BaFin) is required ( Section 32 I in conjunction with Section 1 Ia 2 No. 4 KWG; granting of licenses for institutes); In accordance with Section 33 I 1 No. 1 Letter c KWG, proof of initial capital of at least EUR 730,000 must be provided. If financial instruments are purchased or sold for own account without the requirements for proprietary trading within the meaning of of the KWG are fulfilled, this does not necessarily mean that no permission from BaFin is required for such proprietary business. The operation of such proprietary business with the simultaneous operation of banking business or the provision of financial services i.S. of § 1 Ia 2 No. 1–5, 11 KWG subject to the reservation of permission from BaFin (§ 32 Ia KWG).