Although FX brokers have only recently emerged in the prop trading space, two out of three retail investors consider them more trustworthy than standard prop firms. The recent study also indicates that the profile of proprietary investors remains relatively stable, with a majority continuing to prefer CFDs over futures.

Survey Shows Traders Prefer Broker-Backed Prop Firms

According to a survey conducted by PipFarm, regulated brokers entering the proprietary trading market are changing the established rules of the game. Currently, almost 60% of prop firm users believe that those operated by FX/CFD companies can be trusted more. Only 14% disagreed with this statement, while over 26% had no opinion.

“Just because retail prop firms are not regulated does not make the business model simple,” commented James Glyde, the CEO of PipFarm. “Most (if not all) recent prop firm failures can be traced back to a lack of internal controls. Prop firms backed by brokers or experienced management teams should have the skills, infrastructure, resources and controls to manage the business properly, which is why traders perceive such firms.”

This is certainly a positive signal for brokers entering the space, whose numbers are growing each month. One of the newest additions is ATFX, which announced its expansion into prop trading in late October.

Axi pioneered this market among FX/CFD brokers by being one of the first to launch its own prop brand, Axi Select. Other firms soon followed, including OANDA with Labs Prop Trader, Hantec Markets introducing Hantec Trader, and IC Markets launching IC Funded.

Beyond greater trust in broker-backed prop firms, respondents also indicated that companies with in-house tech rather than external solutions are much more reliable. 61% of traders agreed with this opinion, 31% had no opinion, and only 8% disagreed.

The decision to choose regulated, broker-backed proprietary trading firms is becoming increasingly prudent as global regulators intensify their scrutiny of the industry. In July, Italy's Consob likened proprietary trading to “video games” rather than legitimate trading activities. Marco Martire, Fintokei's Italy Manager, noted that regulatory attention on the prop firm sector is currently very high.

“The price war and easy challenge period is coming to an end, and traders appreciate a more transparent and institutional approach,” added Glyde

Similarly, India's Securities and Exchange Board (SEBI) recently referred to prop trading as “fantasy games.” The European Securities and Markets Authority (ESMA ) has also initiated discussions on regulating prop trading, and the Czech market watchdog confirmed that the activities of prop trading firms may be subject to MiFID regulations.

In a recent interview with Finance Magnates at the iFX EXPO International 2024, the CEO of PipFarm, revealed that “the risk is incredibly hard to manage in the prop trading industry.” The full conversation is available in the video below:

Stable Profile of Prop Traders

The survey, which PipFarm exclusively shared with Finance Magnates, is the latest in a series of studies shedding light on the prop trading industry, allowing for analysis and comparison of how it changes over time.

Most prop trading investors are relatively new to the market, with 34% trading for 1–2 years and 31% for 3–4 years. In total, 65% of investors entered the market since the 2020 pandemic.

The average number of challenges attempted by individual traders has remained consistent over the months. According to PipFarm's latest poll, 42% attempt 1–4 challenges, while FPFX Tech's September data shows traders attempt 3 challenges on average.

Profitability figures are also similar, with PipFarm's August survey showing 41% of traders being profitable. FPFX Tech reported 45% for traders who passed evaluation, though among all traders taking the test, only 7% ever achieved a payout.

According to data from PipFarm, the average trader invests approximately $4,270 in proprietary firm challenges, aiming for substantial returns. However, FPPFX Tech reports a lower average expenditure, indicating that a single account typically spends around $800 on challenge purchases over its entire activity cycle.

Futures Trading Still Outside Main Interest

Broker-backed prop firms are emerging mainly due to regulatory concerns that have intensified this year. Companies not operated directly or indirectly by FX/CFD firms are increasingly expanding their offerings to include futures markets.

MyFundedFutures by MyFundedFX has been operating for some time. In July, The Funded Trader took a similar step by introducing The Futures Trader brand. However, PipFarm's survey data shows that most prop traders still prefer CFDs.

When asked “Have you tried futures trading prop firms?” only 34% responded positively, while the vast majority (nearly 66%) said no. Interestingly, this didn't prevent respondents from answering “I like both” (50%) when asked whether they prefer CFD or futures props.