Education
What Is Proprietary Trading?
A plain-English primer on how proprietary trading firms operate, how they make money, and how they differ from hedge funds and brokers.
Proprietary trading firms trade with their own capital — not client money. Their P&L is the firm's P&L. This distinction shapes everything from compensation to risk culture.\n\nBroadly, the industry splits into two camps. Traditional prop firms (Jane Street, Optiver, Jump, DRW, Citadel Securities) deploy internal capital across market making, arbitrage, and quantitative strategies. They are typically partnerships with intense hiring bars and seven-figure compensation for top traders.\n\nRetail-facing funded trader programs (FTMO, Topstep, MFF, TFT) emerged in the last decade. These firms 'evaluate' traders through paid challenges and allocate capital — usually simulated — to those who pass. The economics are different: firms earn a meaningful share of revenue from challenge fees themselves.\n\nBoth models live under the same umbrella term, but the day-to-day reality could not be more different.
Firms mentioned
Quick reference for the firms referenced above — pulled from our live directory.
Citadel Securities
Miami, USA
- Model
- Firm Capital Model
- Split
- 50%
- Payouts
- Annual bonus
- Max
- Institutional only
Compare these side-by-side in the firm comparison tool or browse the full directory.
Frequently asked
Background reading that complements this story.
- What is a proprietary trading firm?
- A proprietary (or 'prop') trading firm uses its own capital to trade financial markets, and many modern firms let outside traders access that capital after passing an evaluation. Profits are split between the trader and the firm based on a published payout schedule.
- Are prop firms regulated?
- Regulation depends on the firm's structure and jurisdiction. Traditional bank or institutional prop desks fall under broker-dealer or securities rules. Most retail-facing evaluation programs are not registered broker-dealers — they sell access to a simulated or firm-funded account rather than handling retail brokerage activity, which is why the rules can differ widely by country.
- How do payouts work at a prop firm?
- After hitting profit targets and respecting risk rules, traders request a payout. The firm pays the trader's share (commonly 70–90%) on a published schedule — bi-weekly, monthly, or on-demand — through methods like ACH, wire, or crypto. Cadence and minimum thresholds vary by program.
More background: the glossary, our education library, and our transparency policy.
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