| Name | Logo | Min Challenge Cost | Max Payout | GMG Rating | Customer Reviews | CTA | Feature | Expand |
|---|---|---|---|---|---|---|---|---|
 | Min Challenge Cost $100 | Max Payout $100,000 | GMG Rating | Customer Reviews | Visit Platform Simulated Trading | Prop Trading Account Types:
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What is a proprietary trading firm?
Proprietary trading (prop trading) is when a financial institution trades and invests their own money to generate profits, rather than charging fees and commission from trading and investing on behalf of their clients’ money.
Higher potential revenue is a key benefit of proprietary trading, but it can also provide additional benefits for a firm, such as allowing them to become market maker (and therefore help set the price of the asset in question), or to build up a stockpile of an asset to provide liquidity for their clients.
How do proprietary trading firms work?
Prop firms run paid-for trading competitions on simulated markets, where if you pass a series of challenges, you win the chance of trading on a funded account. By winning a funded account, you can potentially share in the profits generated from it.
This is a new type of proprietary trading, historically, financial firms (such as banks and asset management firms) that undertake proprietary trading have the opportunity to generate larger gains than by simply taking fees, but the risk is much higher too.
In simplistic terms, imagine a company with £10 million in cash reserves. They’re considering an investment that could potentially make gains of 10% over the next year, which would mean generating revenue of £1 million.
That’s significantly higher than what the company would generate in interest if they left the funds in cash. For example, some banks currently offer interest of only 1.85% on their business savings accounts for balances over £10m.
While proprietary trading is generally regarded as something that mainstream banks and financial firms do ‘on the side’ of their normal client trading activities, there are some investment companies such as Jane Street Capital and Citadel Securities (known as prop trading firms) whose sole focus is trading their own funds and acting as market makers.
Can you make money using a prop firm?
According to research from Merchant Seven, around 93% of traders never receive a payout when using a prop firm. This is a higher loss rate than the percentage of traders who lose money when trading CFDs, which our research shows is between 45% and 80%.
The strategy and consulting firm headed up by ex-TradingView CEO Pierce Crosby analysed proprietary data from technology providers serving 300+ firms and processing hundreds of thousands of evaluation accounts and found that from 100 traders purchase evaluations:
- 78 fail the initial assessment
- 22 pass and receive “funded” accounts
- 7 receive their first payout
- 3 achieve more than one payout
This means that for the average prop firm, challenge fees represent 78% of revenue, with payout obligations of less than 10%.
The problem here, as with CFD brokers running B-books, especially when trading can be a form of high-risk investment, is that there is a conflict of interest where prop firms profit most when traders fail.
So, yes, it is possible to make money from using the new style of prop firms, but only for a very small percentage of successful traders.
This is in contrast to the old traditional style of prop firms, where traders trade with a firm’s money, directly in the market, in the hope of generating profits.
Are prop trading firms regulated by the FCA?
No, prop trading firms, funded trading accounts and trading competitions are not regulated by the FCA. If you open an account and buy a challenge, you will not be protected by the UK financial regulator the Financial Conduct Authority, and your funds are not protected by the FSCS.
However, in August 2025 industry trading site Tradeinformed reported that the FCA were aware of pop firms. This means that prop firms may at some point come under the supervision of the FCA or be banned in the UK in the same way that Binary options trading was.
For institutions, proprietary trading had a part to play in the 2008 global financial crisis as banks and other big firms made speculative bets on assets like mortgage backed securities.
The UK’s approach has been not to ban proprietary trading specifically, but to instead focus on strengthening the overall regulatory requirements for a strong financial sector. In simple terms, they don’t mind firms taking higher risks in certain areas of their business (e.g. prop trading desks), as long as that is balanced out by the overall risk of the bank as a whole.
That’s in contrast to the US, where the ‘Volcker Rule’ effectively prop trading until the regulations were relaxed slightly in 2020.
Are proprietary trading firms illegal?
No, proprietary trading is not illegal. In the UK proprietary trading is an allowable component of any company’s business model, as long as they meet the usual regulatory conditions such as capital adequacy and transparency.
With that said, firms that do it also have to be very careful not to end up on the wrong side of the law for other, related offences, like insider trading.
Prop Trading FAQ
Yes, outside of the United States prop trading is a common banking practice in major economies such as the UK, European Union, Canada and Australia.
Proprietary trading creates an environment for conflicts of interest, illegal activity like insider trading, as well as high risk strategies which could potentially put client funds at risk. This isn’t to say that all proprietary trading is bad, but it does come with greater risk than typical financial firms operations.
Goldman Sachs used to operate significant proprietary trading desks prior to the passing of the Volcker Rule. The bank had stated that up to 10% of its revenue was generated through prop trading strategies, but closed down its ‘principal strategies desk’ in 2010.
A hedge fund invests client money in exchange for fees and commissions, whereas proprietary trading is when a company invests its own money.