Due to its explosive growth since 2020, the online prop firm industry has come under some criticism in the recent months since My Forex Funds got shut down by the regulators. This has led to a discussion within the industry as to what will happen with online prop firms and how traders can safeguard themselves against the potential risks.

Elite Funded Trading Accounts

In this article, we’re going to look at what, we believe, will happen with the online prop firm space, what can be done to safeguard against the risks and what will happen to prop firms when regulation enters this space. So, let’s get into it!

The Future Of Prop Firm Trading – Is It Doomed?

Since My Forex Funds got shut down in late 2023, traders are seemingly more cautious about the prop firms they work with and are actively looking to avoid working with prop firms that may be shut down. This isn’t negative – it’s paramount for traders to use due diligence when working with a broker, prop firm or any external company for that matter. Due to the lack of regulation in the industry, new prop firms are popping up every week and many of them should not be trusted by traders. In fact, there are only a small handful of prop firms that can be truly trusted to have your best interests at heart.

The speculation now is that the governing bodies and regulators will put a ban on the whole prop firm industry – which is not going to happen. The prop firm industry has been alive, well and regulated for decades. It’s only the online prop firm space that is yet to see regulation.

Will The Prop Firm Industry Become Regulated?

We don’t believe it’s an ‘if’, but a ‘when’. It’s almost a certainty that the industry will become highly regulated at some point. We are yet to understand which governing bodies may regulate this space. It could be the gaming regulators or the financial regulators. It would most likely, in our opinion, by the financial regulators.

Regulation coming is great news for traders! In fact, it’s great news for everyone besides shady actors with non-reputable prop firms. For us here at Lux Trading Firm, we welcome regulation. We have built our business around the idea that when regulation comes – we will already be compliant. Hence, we only fund traders with real trading capital and don’t operate with pretend funds like many of the Ponzi prop firms.

When Will Regulation Occur?

Regulation is not something that happens overnight. It often takes many years for regulators to start looking at something before deciding to act. If we had to hazard a guess, with the sheer amount of traction this space has got over the last few years, we’d imagine that regulators will be coming within the next few years. 

When the industry does become regulated, overnight you’ll see many prop firms shutting down without even attempting to become compliant with the new regulations. We imagine that many prop firms will also seek to move offshore in a bid to outrun the regulations – much like we see with offshore forex brokers.

Which Prop Firms Will Go Bust?

When the regulators do come, there will be a certain group of prop firms that will get shut down. Largely speaking, the industry can be split into two groups:

Simulated Prop Firms

Real Money Prop Firms

Simulated prop firms never give traders any real capital to trade. Therefore, when a funded trader makes profits – it costs the company money. The only way that traders can be paid is from other traders signing up and failing their prop firm challenges – This is literally a Ponzi scheme. Winners getting paid out because of losers. These firms will be shut down by the regulators.

The second group – real money prop firms like Lux Trading Firm only make their profits through a profit split with successful traders. Therefore, if no more traders ever signed up to our prop firm, our profitable traders would still be paid out on every withdrawal as they’re generating their own profits, and it’s sustainable. This is how the traditional brick and mortar prop firm business has always worked – real money prop firms will not be shut down by regulators.

Which Prop Firms Will Get Regulated?

eal money prop firms will be the prop firms that will be regulated by the governing bodies and will remain open for traders. There are currently very few real money prop firms in the industry, but there will no doubt be more when the regulations come. We expect that many of the simulated prop firms that have deep enough pockets will change their operating model and start offering real capital to traders.

In Conclusion – Is The Online Prop Firm Industry Going To Fail?

In summary, the online prop firm industry will be around for many decades to come. It’s not going anywhere! However, there will no doubt be strong regulation coming in the following years, which is hugely positive. This will weed out all the prop firms that are scamming traders and should not be operating.

Lux Trading Firm is one of the few real money prop firms in the industry, and we pride ourselves on staying compliant and remaining compliant when regulations do come into effect.

If you’re interested in becoming a funded trader, work with Lux Trading Firm today!

About Company

We are a leading proprietary trading firm based in London (UK), specializing in supporting experienced prop traders.

Our commitment is to help traders excel and provide the tools and capital they need to compete in a marketplace defined by change and disruption.

We are focused on seeking out trading and investment opportunities to grow our capital in the global financial markets.

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