The prop trading industry has become very cautious after My Forex Funds was slapped with fraud charges in the United States. Behind the scenes, these prop trading companies are taking many steps to bolster their compliance. However, one of the visible actions is the sudden change of wording displayed on their websites.
Prop Trading Platforms Choose Safe Words
Several prop trading firms, including the popular ones, are now using carefully picked words and phrases to highlight that their "challenges" are taking place on virtual trading platforms rather than on live markets.
One of the prominent examples is The Trading Pit. The platform recently added a Risk Disclosure to the footer of its website, which was absent at the beginning of this month.
"The Trading Pit offers exclusively demo accounts to all users. All assets and trading activities are purely virtual," the risk disclosure reads. An archived version of The Trading Pit's website from earlier this month does not have this Risk Disclosure.
My Funded FX is another prop trading platform that has added some significant keywords recently to its website. It added the word "Simulated" at the top of its website, by altering the phrase "Manage Capital" to "Manage Simulated Capital."
It also added the word "virtual" to its footer, which was missing from last month's archived version of the website. "One of the biggest obstacles most traders face is not having enough Trading Virtual Capital. We solve that! Take the Challenge. Pass. Get Started!" the footer of My Funded FX website reads.
Bespoke Funding Program, another name in the prop trading industry, has now appended the word "virtual" to its rows' descriptions of profits and losses. An archived version of its website from earlier this year does not contain the word "virtual".
Another prop trading platform that recently included the words "simulated" and "virtual" is Funded Engineer. In fact, it uses the word "simulated" 16 times on the homepage of its website, while "virtual" is used only once. An archived version of its website from earlier this year does not mention either of those words, even once.
Tradiac, a prop trading platform launched earlier this year, also highlighted: "All accounts offered by Tradiac are simulated demo accounts with virtual capital."
Finance Magnates reached out to several prop trading firms that changed the wording on their websites but did not receive any response at the time of writing.
What Is the Alternative Word for "Prop Trading"?
Interestingly, some lesser-known prop trading platforms are not even using the term "prop trading" to market themselves, although their business model is classic prop trading. One such platform is Stocknet Institute, which claims to have been in operation since March 2021 and is based in the United Kingdom.
Stocknet Institute does not use the term "prop trading" on its homepage; only some of its clients' testimonials call it a "prop firm." However, the "About" section of its website called its offerings "an authentic prop trading model centered on sustainability, transparency, and collaboration."
Meanwhile, some top prop trading firms have already been cautious with their wording from the beginning. Surgetrader, which is now running an extensive campaign on social media, has called its "challenge" an "audition". FTMO, another popular prop trading platform, also clarified on its website that it "simulate[s] the real market conditions" and "demo trading accounts with virtual funds."
My Forex Funds Engages in Legal Battle
The worries for the prop trading firms started at the end of August as the Commodity Futures Trading Commission (CFTC) in the US brought a lawsuit against My Forex Funds, which has generated $310 million in income in the last three years.
Prop Trading firms provide capital to retail traders for trading if they can pass a trading test, often called a "challenge", in a virtual trading environment. These platforms charge a fee for the "challenge", which also decides the limit of the given capital. As these prop trading platforms do not handle clients' monies, they do not fall under the regulatory framework for brokers. However, the rise in popularity of such platforms has alarmed regulators globally.
The CFTC alleged that My Forex Funds and its CEO committed fraud and misappropriated funds. However, the platform maintains that it did not defraud any trader, Finance Magnates reported.
In a motion filed this week, the lawyers of My Forex Funds claimed that the CFTC "recklessly mischaracterized" its transactions and flagged two transactions totaling CA$31.55 million as they were paid to the CEO, Finance Magnates reported exclusively. However, according to the motion, that money went to the Canadian tax authorities.
