Prop Firm Regulations Incoming?

Talks are supposedly underway

The prop trading business is booming…

Sadly though we’ve seen numerous companies go bust taking hard-earned trader profits with them.


Well at the moment it’s a totally unregulated industry.

Unlike a traditional broker who needs to be regulated in the country they are operating in, online prop firms do not.

Anyone with a marketing budget and some off-the-shelf tech can start a prop firm… so, of course, this attracts a lot of cowboys…

Zero barrier to entry, thirsty audience = scammers paradise

So far regulators have taken the view that as these firms don’t actually handle client money the OTC regulations don’t apply.

Most are on demo accounts anyway (except Top Step AFAIK)


The industry is fully expecting some sort of regulation, (this article here suggests ESMA have already been conducting talks.)

Regulators are supposedly deciding on how best to deal with this new industry.

I expect they need a year just to understand it, they always seem to be so out of tune with everything…

So what do I think might happen?

Well, I am a capitalist at heart and I tend to lean towards the free market, personal responsibility, and deregulation.

But saying that, I do understand some sort of regulation protects consumers, so I don’t think it should be the Wild West.

Maybe we’ll see some sort of mild regulation.

Firms need to be liquid, authorised, and registered.

Perhaps there will also be some transparency with the marketing “x% of traders fail these challenges” or something similar to the CFD ads.

Hopefully, we won’t see a heavy-handed approach that shuts the whole business down.

Ultimately I think prop firms play a role in the system somewhere, but it just needs a bit more structure to ensure traders aren’t getting scammed and to make the game a level playing field for all.

What do you think?

Should prop firms be regulated? And if so, how?

Have a listen to my conversation with Saul Lokier, CEO of leading prop firm The 5ers. We talked a lot about the industry and where he thinks it’s heading.