Prop Firm

A proprietary trading firm — prop firm — is a company that funds individual traders to trade proprietary capital, paying out a share of any profits. The model has two main lineages.

The traditional lineage is the bank or institutional prop desk: a regulated firm where professional traders trade real capital provided by the firm, typically with base salary plus performance bonus. These desks have largely disappeared from large investment banks since the Volcker Rule (2014) but persist at standalone trading firms (e.g. Jane Street, Jump, DRW) and at smaller market-making and arbitrage operations.

The newer and now-dominant retail lineage is the evaluation prop firm: a company that sells paid evaluations and then funds the small fraction of traders who pass. The "funded account" in this model is almost always simulated — the firm is running a fee-based business and paying winners from the fee pool rather than trading real capital alongside the trader. FTMO popularized this model in the late 2010s; the category now includes hundreds of firms with varying degrees of legitimacy.

When the word "prop firm" is used without qualification in 2026, it almost always refers to the retail evaluation model. The institutional model is now a small subset of the industry by trader count, though it still represents the bulk of actual capital-at-risk in proprietary trading.