The foremost objective of RM is to quickly identify, eliminate and minimize losses to firm capital, however and whenever such losses may occur. Other objectives include regulatory compliance, nurturing junior traders and facilitating trading. The RM function is layered and executed by the Risk Management Supervisor and the Proprietary Trading Supervisor whose roles include Surveillance, Supervision, Evaluation and Training. The successful management of risk to firm capital is key and central to the firm's philosophy, strategic equity trading focus, trader supervision and training. From its inception, the firm has always capitalized its traders, i.e., put its own capital at risk with the traders.
New traders have highly restrictive trading authorization.
As a new trader grows in skill, the size and number of his trading positions consequently grows. In proprietary trading, each trader trades for his own account, meaning he is responsible for the profit and loss of that account, and his compensation is directly tied to his profitability and performance. Each trader is naturally motivated to execute trades offering the highest expectancy, i.e., the best rate of return at the lowest perceived risk. Consequently, risk management, e.g. money management, in its simplest form starts with the individual trader. Learning proper risk management skills takes time and training and daily supervision.