What is a prop trading firm?
10 min read
A proprietary trading firm trades its own capital, not client money. That is the entire definition — and worth holding onto, because the phrase now covers two businesses that work very differently and share only a name.
The original: an institutional trading desk
The classical prop firm hires traders, seats them at a desk, and gives them firm capital to trade. The trader draws a salary plus a share of what they make. The firm's edge is selection and infrastructure — it finds people who can trade, then equips them better than they could equip themselves.
This model is exclusive by necessity. A desk seat costs the firm real money before the trader has made anything, so hiring is slow and selective, and most applicants never get near one.
The modern: an evaluation firm
The retail prop firm inverted the economics. Instead of paying to find traders, it charges applicants for the assessment. A trader pays a fee, trades a simulated account against a published rulebook, and is funded if they meet its terms.
This opens access enormously — anyone can be evaluated — but it also changes what the firm sells. The institutional desk sells capital and infrastructure. The evaluation firm sells an assessment, and the capital is what the assessment leads to.
| Institutional desk | Evaluation firm | |
|---|---|---|
| Who is admitted | Hired, selectively | Anyone who pays |
| Trader pays | Nothing | An evaluation fee |
| Firm's revenue | Trading profit | Fees, and a share of profit |
| Capital traded | Firm capital, real | Simulated during evaluation |
| Trader's downside | Losing the job | The fee |
The conflict sitting inside the evaluation model
Once a firm earns money from fees, something uncomfortable follows. The same company that takes your fee also decides whether you passed, using data only it can see.
Failing you is cheaper than funding you.
This is not an accusation against any particular firm. It is a structural feature of the model, and it exists whether or not any given operator acts on it. A trader has no way to distinguish an honest firm from a dishonest one, because the evidence that would settle it is held entirely by the firm.
Removing the conflict, not promising around it
The conflict disappears if the evidence stops being private. If the prices that produced every fill are recorded, and the rules are published as the same configuration the engine actually judges against, then a verdict is reproducible — a trader can replay it and reach the same answer independently.
Anchoring the verdict on a public chain completes it, because the result then carries a timestamp nobody can revise afterwards. The firm keeps its commercial role and loses its ability to quietly change the answer. That is the model this site runs, and traders keep 80% of funded profit under it.
Common questions
- What is a prop trading firm?
- A proprietary trading firm trades its own capital rather than client money. The term now covers two models: institutional desks that hire traders and fund them directly, and evaluation firms that charge a fee to assess a trader before funding them.
- How do prop firms make money?
- Institutional desks earn from trading profit. Evaluation firms earn from evaluation fees and from a share of the profit that funded traders generate. Because most applicants do not pass, fee revenue is a significant part of the model.
- Is a prop firm the same as a broker?
- No. A broker holds your deposit and gives you market access; your own capital is at risk. A prop firm funds you with its capital, or with simulated capital during an evaluation, and takes a share of the profit rather than holding your money.
- What is the conflict of interest in prop firm evaluations?
- The firm that collects the fee also decides whether the trader passed, using data only it holds. Failing a trader is cheaper than funding them. It is a structural conflict rather than an accusation, and it is removed only when verdicts can be independently reproduced.
- Do I trade real money during a prop firm evaluation?
- During an evaluation the capital is simulated. The fee is real and the payout is real, but the trading itself is assessed against recorded market prices rather than executed in a live market.