Will Prop Firm Eclipse Traditional Forex Brokerage Business?


Published on July 08, 2025

Prop firms have become an accepted reality on the Forex market a while ago and continue to increase in popularity since then, attracting more and more retail traders every day. This raises the question: Will prop firms surpass regular brokers in popularity?

The differences between prop firms and regular brokers

To better understand the answer to that question, one needs to know the differences between prop firms and regular brokers.

Proprietary firms (also known as prop firms) offer their own funds for trading, taking a share of traders’ profits as payment for the firms’ services. Typically, traders must pay a fee and undergo an evaluation period first to demonstrate their ability to generate profits in the market. Additionally, as a rule, traders do not trade on the real market, instead using a simulated trading environment.

Traditional brokers function as intermediaries between the market and traders. Traders risk their own money but also retain all the profits they manage to generate. Brokers profit from spreads, commissions, and sometimes other fees. Trades initiated via regular brokers are executed on the real market.

What makes some traders prefer prop firms over traditional brokers?

Prop firms have several significant advantages over traditional brokers.

The most obvious one is that traders do not have to risk their own money. This makes prop firms especially attractive to new traders, who often lack significant capital for trading. Small initial capital makes it easy to lose all the money and limits potential gains. Meanwhile, with the relatively low entrance fee, prop firms offer comparatively significant starting capital, giving traders more freedom to experiment on the market and increasing their profit potential.

Some traders also claim that tangible goals, which most prop firms set for their traders, help in achieving proper trading discipline. Again, this is more appealing to newbie traders, who lack the skill to set their trading goals and proper limits (drawdowns, stop-losses, risk-reward ratio, etc.).

What prevents prop firms from overtaking the market from regular brokers?

One of the most significant drawbacks of prop firms for experienced traders is their limitations on what, when, and how you can trade. Prop firms can have restrictions on drawdowns, overnight position holding, weekend and holiday trading, trading during important events (such as central banks’ interest rate decisions and major macroeconomic data releases), and the use of certain expert advisors, among others. These limitations can render certain trading strategies incompatible with the requirements of prop firms. For example, limits on overnight holding, weekend and holiday trading, and trading close to important events can easily make a prop firm unsuitable for swing and position traders.

Many traders do not trust prop firms. In theory, the goals of prop firms should align with those of traders as they both profit when a trader earns money on the market. However, there is widespread speculation that prop firms primarily profit from evaluation fees, rather than actual trades. This means that prop firms are encouraged to fail potential traders on an evaluation, forcing them to retake the evaluation, which requires them to pay fees to the firm again. The fact that trading is simulated, rather than real, makes it easier for prop firms to adjust the results of trading to their benefit and harder for traders to detect such behavior.

The fact that prop firms are not regulated makes it even harder for traders to trust them. While a lack of regulations may be seen as a benefit for some traders, as it usually makes it easier to start trading, unregulated brokers are inherently less trustworthy than regulated ones.

Conclusion

While the advantages help prop firms to gain popularity, the disadvantages make it unlikely that they will be able to eclipse retail brokers in the foreseeable future. Whereas the relatively easy entrance requirements make prop firms appealing to new traders, more experienced and established traders still often prefer regular brokers. One of the possible futures, according to some market analysts, is the merger of prop firms and regular brokers into some sort of a hybrid model. One of such possible modes is a regulated prop firm that executes trades on a real market. Whatever the case, regular brokers are unlikely to go extinct anytime soon.

Newsdesk Editor