Jon Light, Senior Director of Product Management at Devexperts
In recent years, retail prop trading has emerged as a viable alternative to the traditional brokerage business model. The segment has marketed itself effectively, and activated new retail demographics that other financial service providers have struggled with in the past. The retail prop trading industry was valued at $12 billion in 2025, with some expecting this to rise to $20 billion in 2026.
As with any other market that garners wider attention, prop trading appears to be coming of age. Mainstream awareness has turned trading contests into a social media phenomenon, while also placing the industry under increased regulatory scrutiny. The next few years are likely to be critical as the industry tackles these regulatory challenges, consolidates, and expands into other areas such as retail brokerage.
Institutional precursors
The institutional heyday of proprietary trading took place between the mid-1980s and the onset of the 2008 financial crisis. The Glass-Steagall Act of 1933, which prohibited commercial banks from trading with their own funds, had been introduced to prevent some of the excesses that contributed to the stock market crash of 1929.
By the mid-1980s, Glass-Steagall was being eased via regulatory reinterpretations that effectively eroded its separation between commercial and investment banking. This led to an expansion of proprietary trading activity among banking institutions, as well as the establishment of independent proprietary trading firms.
In the wake of the 2008 crisis, the Dodd-Frank Act introduced the Volcker Rule. Like Glass-Steagall before it, the rule banned banks from prop trading and shifted this activity to independent proprietary trading firms like DRW and Jane Street, which have been two of the most successful prop trading firms. The former was established during the period of Glass-Steagall easing, while the latter was founded post-Dodd-Frank.
Unlike hedge funds, prop firms trade with the company’s own capital, essentially allocating funds to traders and providing performance-based compensation and profit shares with them.
The Rise of Retail
Top Step is acknowledged as the first retail prop firm. Founded in 2010 by former floor trader Michael Patak as Patak Trading Partners, Top Step would go on to pioneer the retail prop trading model. Blending education, gamification, and market access into an attractive package, the firm introduced trading contests in a simulated environment where successful contestants could earn a funded account to trade with the firm’s capital.
The trading evaluation model, which exempted Top Step from the regulatory requirements of securities brokers, was quickly picked up and adapted by many other market participants. Notably, the technologies used by retail CFD brokers, which had themselves enjoyed a period of massive growth in Europe and the Asia-Pacific region, provided a professional and cost-effective way to run the same kind of business model via a different instrument.
Typically, US prop firms like Top Step were able to partner with registered Futures Commission Merchants, while circumventing the need for broker-dealer regulation due to the simulated nature of the trading they offered.
Similarly, prop firms that used a CFD backbone to offer trading challenges were able to do the same. This was achieved by partnering with MetaQuotes licensees and offering challenges via grey-labelled platforms in demo mode.
In 2024, MetaQuotes restricted its licensees from continuing to do so, ostensibly in order to ensure compliance with US CFD regulations, but this only led to other entrants into the space, such as OANDA, and to the rival platforms gaining a firmer foothold, among them our own DXtrade platform.
Increased scrutiny
The surging popularity of the retail prop trading business model, and particularly the way it has captured the imaginations of younger traders, is leading to regulators placing the industry under increased scrutiny.
In the EU, several financial regulators, among them Italy, Belgium, and Spain, have raised concerns about retail prop trading. In Australia, the Australian Securities and Investments Commission (ASIC) has issued warnings to financial influencers that promote prop trading in their content without disclosing risks.
In the United States, the CFTC has raised the question of whether prop firms should fall under the category of Commodity Trading Advisors and is considering whether prop firms that offer exchange-traded derivatives should have to register with the CFTC regardless of the simulated nature of the challenges they provide.
Also under consideration by regulators are requirements that firms unambiguously disclose fee and payout structures, success rates, as well as stricter observation of KYC and AML requirements, and even appropriateness tests before onboarding new traders. Despite these suggestions, a lack of regulatory clarity pervades the industry, with some suggestions that 2026 may be the year where regulatory procedures pertaining to the prop trading business model are formalized.
Prop trading instruments
As far as the instruments on offer go, retail prop trading has developed along similar geographic lines as retail brokerage. US-based prop firms initially focused on futures and spot FX, while prop firms in other markets opted for CFDs on underlying assets like FX, equities, indices and commodities.
Increased attention from regulators and a more general move towards listed markets has led some firms, particularly those targeting US consumers, to pivot towards exchange-traded futures, owing to the perceived transparency of listed markets as compared to OTC.
This is echoed in the wider prop trading community with many discussions taking place over social media as to which instrument is to be preferred from the perspective of the end trader.
Furthering this trend, one of the new frontiers in this space is the offering of prop trading challenges on options markets. A relatively newer phenomenon, this move leverages the growing interest and participation from retail traders in options markets, which peaked during the pandemic, but has remained elevated ever since.
From our perspective as a technology provider, we’re observing increased interest in trading platforms like DXtrade that are purpose-built for exchange traded derivatives like futures and options and include the various instrument-specific risk management capabilities, as well as client-facing tools necessary for the trading of these markets.
This is opening the space up even further, with many firms looking beyond incumbent platforms to consider a broader range of providers. The growing interest in prop options raises the bar even further, both in terms of risk management tools, but also to the sourcing of market data itself, as a competitive options offering necessitates more specialized data services, such as options Greeks. Our sister company, dxFeed has also seen an increase in these types of requests.
Consolidation and expansion
Retail prop trading’s mainstream moment is leading to market consolidation, with many smaller firms having dropped out following the 2024 actions by MetaQuotes, while larger players have moved to secure their dominance via strategic acquisitions such as FTMO purchasing Oanda, and Top Step partnering with Plus500 to further its ambitions of expanding into retail brokerage.
The latter reveals another nascent trend, with some prop firms like FundedNext pursuing brokerage licenses. This is taking place both internationally via offshore CFD licensing and in the US via FCM partnerships. The reverse is also true, with established brokers venturing into the world of prop trading. AxiTrader, and IC Markets being prominent examples of this move.
The bottom line is that the success of the prop trading business model, its ability to onboard new traders that traditional brokers may not otherwise have been able to attract, as well as the fact that prop trading provides a potential gateway into real money trading, suggests that things are set to heat up further in 2026 as the barriers between what it means to be a traditional brokerage and a retail prop firm continue to blur, and regulators move to make their own positions clearer.
Jon Light, Senior Director of Product Management at Devexperts
In recent years, retail prop trading has emerged as a viable alternative to the traditional brokerage business model. The segment has marketed itself effectively, and activated new retail demographics that other financial service providers have struggled with in the past. The retail prop trading industry was valued at $12 billion in 2025, with some expecting this to rise to $20 billion in 2026.
As with any other market that garners wider attention, prop trading appears to be coming of age. Mainstream awareness has turned trading contests into a social media phenomenon, while also placing the industry under increased regulatory scrutiny. The next few years are likely to be critical as the industry tackles these regulatory challenges, consolidates, and expands into other areas such as retail brokerage.
Institutional precursors
The institutional heyday of proprietary trading took place between the mid-1980s and the onset of the 2008 financial crisis. The Glass-Steagall Act of 1933, which prohibited commercial banks from trading with their own funds, had been introduced to prevent some of the excesses that contributed to the stock market crash of 1929.
By the mid-1980s, Glass-Steagall was being eased via regulatory reinterpretations that effectively eroded its separation between commercial and investment banking. This led to an expansion of proprietary trading activity among banking institutions, as well as the establishment of independent proprietary trading firms.
In the wake of the 2008 crisis, the Dodd-Frank Act introduced the Volcker Rule. Like Glass-Steagall before it, the rule banned banks from prop trading and shifted this activity to independent proprietary trading firms like DRW and Jane Street, which have been two of the most successful prop trading firms. The former was established during the period of Glass-Steagall easing, while the latter was founded post-Dodd-Frank.
Unlike hedge funds, prop firms trade with the company’s own capital, essentially allocating funds to traders and providing performance-based compensation and profit shares with them.
The Rise of Retail
Top Step is acknowledged as the first retail prop firm. Founded in 2010 by former floor trader Michael Patak as Patak Trading Partners, Top Step would go on to pioneer the retail prop trading model. Blending education, gamification, and market access into an attractive package, the firm introduced trading contests in a simulated environment where successful contestants could earn a funded account to trade with the firm’s capital.
The trading evaluation model, which exempted Top Step from the regulatory requirements of securities brokers, was quickly picked up and adapted by many other market participants. Notably, the technologies used by retail CFD brokers, which had themselves enjoyed a period of massive growth in Europe and the Asia-Pacific region, provided a professional and cost-effective way to run the same kind of business model via a different instrument.
Typically, US prop firms like Top Step were able to partner with registered Futures Commission Merchants, while circumventing the need for broker-dealer regulation due to the simulated nature of the trading they offered.
Similarly, prop firms that used a CFD backbone to offer trading challenges were able to do the same. This was achieved by partnering with MetaQuotes licensees and offering challenges via grey-labelled platforms in demo mode.
In 2024, MetaQuotes restricted its licensees from continuing to do so, ostensibly in order to ensure compliance with US CFD regulations, but this only led to other entrants into the space, such as OANDA, and to the rival platforms gaining a firmer foothold, among them our own DXtrade platform.
Increased scrutiny
The surging popularity of the retail prop trading business model, and particularly the way it has captured the imaginations of younger traders, is leading to regulators placing the industry under increased scrutiny.
In the EU, several financial regulators, among them Italy, Belgium, and Spain, have raised concerns about retail prop trading. In Australia, the Australian Securities and Investments Commission (ASIC) has issued warnings to financial influencers that promote prop trading in their content without disclosing risks.
In the United States, the CFTC has raised the question of whether prop firms should fall under the category of Commodity Trading Advisors and is considering whether prop firms that offer exchange-traded derivatives should have to register with the CFTC regardless of the simulated nature of the challenges they provide.
Also under consideration by regulators are requirements that firms unambiguously disclose fee and payout structures, success rates, as well as stricter observation of KYC and AML requirements, and even appropriateness tests before onboarding new traders. Despite these suggestions, a lack of regulatory clarity pervades the industry, with some suggestions that 2026 may be the year where regulatory procedures pertaining to the prop trading business model are formalized.
Prop trading instruments
As far as the instruments on offer go, retail prop trading has developed along similar geographic lines as retail brokerage. US-based prop firms initially focused on futures and spot FX, while prop firms in other markets opted for CFDs on underlying assets like FX, equities, indices and commodities.
Increased attention from regulators and a more general move towards listed markets has led some firms, particularly those targeting US consumers, to pivot towards exchange-traded futures, owing to the perceived transparency of listed markets as compared to OTC.
This is echoed in the wider prop trading community with many discussions taking place over social media as to which instrument is to be preferred from the perspective of the end trader.
Furthering this trend, one of the new frontiers in this space is the offering of prop trading challenges on options markets. A relatively newer phenomenon, this move leverages the growing interest and participation from retail traders in options markets, which peaked during the pandemic, but has remained elevated ever since.
From our perspective as a technology provider, we’re observing increased interest in trading platforms like DXtrade that are purpose-built for exchange traded derivatives like futures and options and include the various instrument-specific risk management capabilities, as well as client-facing tools necessary for the trading of these markets.
This is opening the space up even further, with many firms looking beyond incumbent platforms to consider a broader range of providers. The growing interest in prop options raises the bar even further, both in terms of risk management tools, but also to the sourcing of market data itself, as a competitive options offering necessitates more specialized data services, such as options Greeks. Our sister company, dxFeed has also seen an increase in these types of requests.
Consolidation and expansion
Retail prop trading’s mainstream moment is leading to market consolidation, with many smaller firms having dropped out following the 2024 actions by MetaQuotes, while larger players have moved to secure their dominance via strategic acquisitions such as FTMO purchasing Oanda, and Top Step partnering with Plus500 to further its ambitions of expanding into retail brokerage.
The latter reveals another nascent trend, with some prop firms like FundedNext pursuing brokerage licenses. This is taking place both internationally via offshore CFD licensing and in the US via FCM partnerships. The reverse is also true, with established brokers venturing into the world of prop trading. AxiTrader, and IC Markets being prominent examples of this move.
The bottom line is that the success of the prop trading business model, its ability to onboard new traders that traditional brokers may not otherwise have been able to attract, as well as the fact that prop trading provides a potential gateway into real money trading, suggests that things are set to heat up further in 2026 as the barriers between what it means to be a traditional brokerage and a retail prop firm continue to blur, and regulators move to make their own positions clearer.
Read More
FM Contributors