Prop firms have grown immensely in popularity in the last few years to the point that more retail traders are choosing to trade on funded accounts. The growing popularity has also provided space for more firms to enter the trading space. With the evolution of the crypto and forex markets, their framework is evolving, too. With that said, if you are considering trading with a prop firm, you should know about the latest changes in the forex and crypto trading markets in connection to prop firms.
Regulations Are At the Core of Prop Trading
If you aren’t familiar with prop firms and trading in general, you should first take a deep dive into what is a prop firm and how prop firm trading differs from conventional trading. You might be surprised to know that prop firms were actually once considered to be the shortcut to access the trading market; however, now prop firms have become innately professional as these move in an essentially regulated environment. With that said, it doesn’t matter whether you are a forex prop firm trader or a crypto prop firm trader; you no longer have the option of ignoring regulations.
Understanding the Existing Landscape Regulation
Now, when it comes to forex and crypto trading, both have different regulatory landscapes. For instance, forex regulations have been established by specific authorities, such as the FCA, CFTC, and BaFin. The various forex trading agencies need proper licensing, frequent audits, responsible marketing, and trader protections.
On the other hand, crypto regulations are still under development. Some countries are more than happy to welcome crypto trading, whereas others have completely banned this trading form. The rest simply sit in between and adjust policies to address issues that arise.
Potential Regulatory Challenges of Prop Firms
You should know that running a prop firm requires so much more than a dashboard and capital. What this means is that modern prop trading firms are expected to get properly registered with real financial regulators. Prop firms are also required to verify each one of their trader’s identity. It is mandatory for prop firms to disclose their risks.
Today, prop firms are also expected to clearly define their terms and conditions while leaving nothing out. More importantly, prop trading firms are required to establish AML or anti-money laundering systems.
The Evolution of Crypto Regulations
Crypto regulations are evolving very rapidly with the evolving trading landscape and industry. For instance, the CFTC agency in the USA is now defining the classification of tokens, namely, which tokens are commodities and which are securities. Agencies like these are also defining who is responsible for monitoring the tokens. With the changes in the trading landscape, crypto and forex prop firms are also transforming their processes of onboarding clients, storing data, and monitoring all trading activity.
Conclusion
With the ongoing changes in the trading landscapes, traders are also adjusting to the ongoing shifts. The leverage limits on prop trading have changed the strategy developments, and the changes in funding evaluations have brought about the need for skillful traders. So, if you want to succeed as a trader, you must focus on consistency and emotional intelligence over high-risk trading moves.
