OANDA, a popular brokerage brand in forex and contracts for differences (CFDs), has jumped into the proprietary trading business with the launch of OANDA Labs Trader. Announced today (Monday), the broker will share up to 75 percent of the profits with the traders.

OANDA Enters Prop Trading

Although OANDA is regulated in multiple jurisdictions, the prop trading services will be offered to the clients registered under its Global Markets division, which is authorized by the regulators in the British Virgin Islands.

“Through this program, the most capable traders are empowered with streamlined access to global financial markets across a range of asset classes,” said Kurt vom Scheidt, the Chief Operating Officer of OANDA.

Similar to any other prop trading platform, the traders on OANDA need to pass an assessment test. As seen on its website, the starting fee for the challenge is $249 and goes up to $2,400. The amount of funding depends on the tier of the challenge: the minimum amount is $25,000, and the maximum is $500,000.

In all the challenges, the traders must hit a profit target of 10 percent in Phase 1 and 5 percent in Phase 2. There will also be a daily loss limit of 5 percent and a maximum drawdown of 10 percent.

“In addition to the share they can earn on their profitable trading of virtual funds, traders will receive the necessary tools, such as educational materials and exclusive data-driven features and widgets, to set them up for successful trading,” vom Scheidt added.

A Transparent Business Model

Clarifying its business model, OANDA detailed that the qualified traders on the prop trading platform will be technically treated as signal providers. The proprietary trading models of OANDA will use the signals produced by the traders “in combination with other input variables to guide OANDA's market positioning decisions.”

It further detailed that the capital provided in the OANDA Labs Trader account is virtual; however, it will put the company’s proprietary capital at risk due to the real market positions to be taken based on the signals from the traders. OANDA further clarified that it will share the profits with the traders on all traders, even with the virtual capital.

However, most of the prop trading platforms generate a significant chunk of their revenue from challenge fees, as the success rate of these challenges is too low.

OANDA entered prop trading when the industry was witnessing massive demand. Several other brokers have launched prop trading businesses in the last few months. Due to the controversies around the business model, some brokerages even carefully branded their offerings, avoiding the term “prop trading.”

Meanwhile, My Forex Funds continues to fight the legal battle with the US securities regulator as it faces fraud allegations.