Prop Trading Poses Image Hazard for CFD Brokers: These Two Firms Aim to Fix It

RegTech firm Muinmos and technology provider Brokeree Solutions have announced a partnership focused on proprietary trading compliance and risk management for regulated brokers. This move comes amid ongoing discussions about the legitimacy and regulation of prop trading in the financial industry.

Prop Trading Compliance: Muinmos and Brokeree Solutions to Address the Issue

The collaboration integrates Brokeree's Prop Pulse technology for account management and risk mitigation with Muinmos' client onboarding platform. This combination is intended to offer FX brokers tools for regulatory compliance and risk control in prop trading operations.

“The conversation around prop trading is highly negative these days, but for regulated brokers who have the right controls and risk management in place, prop trading presents an opportunity for an additional revenue stream,” Remonda Kirketerp-Møller, Founder and CEO of Muinmos, commented. “Our combined offering enables the firms to offer a compliant and at the same time competitive prop trading option.”

The partnership aims to address concerns within the industry regarding risks associated with prop trading. In a recent interview with Finance Magnates, PipFarm’s CEO, James Glyde, explained that those risks are “incredibly hard to manage.”

“The mechanics of prop trading are completely different from a CFDs broker where you have a deposit and margin,” he continued, “you can either use that to transfer the risk to the liquidity provider, or you can accept the risk. So the mechanics are completely different, making the risk similar yet different.”

Muinmos and Brokeree assert that they have found a way to address this issues, including the associated reputational risk.

“We are very aware that many regulated brokers are concerned that their reputation will be tarnished if they offer prop trading,” Andrey Kamyshanov, Co-Founder and Managing Partner at Brokeree Solutions, added. “With Muinmos’ compliance expertise and Brokeree’s account management system for prop trading firms, regulated brokers can be reassured that they will have a robust offering to enable them to thrive now and as regulation is inevitably introduced.”

Both companies report having client bases among regulated brokers and express a commitment to compliant trading practices. They indicate an intention to work with regulators to implement controls without unduly restricting legitimate financial activities.

Brokers Enter the Prop Trading Space

Although the prop trading industry doesn't enjoy a good reputation, didn't the CFDs face similar challenges? Regulators worldwide warn against prop firms, much like they once cautioned against brokers.

While many of these warnings are justified, and some unscrupulous firms advertise prop trading as “video games,” the market also includes honest companies that prioritize safety standards.

CFD brokers are now introducing a new quality to prop trading. Thanks to their regulatory compliance, they provide investors with a much higher level of service and guarantee fund withdrawals.

From late 2023 to May 2024, five different firms from the traditional CFD sector entered the industry, including OANDA, Hantec Markets, IC Markets, and Axi. A comparison of their offerings is available below:

Since then, other brokerage brands have decided to try their hand at prop trading. Among them is ThinkMarkets, which launched ThinkCapital, offshore CFD brokers AXE, and FundedBull, founded by a former XM veteran.