Ukraine’s financial market regulator has added two prop trading firms to its warning list. Alpine Funded and Aura Funded were among the seven names the agency flagged last week.
Ukraine Took Action against Prop Firms
Although the two prop firms were named, the National Securities and Stock Market Commission (NSSMC) did not justify their inclusion. However, it was not the first time the regulator warned against a prop trading brand; the first caution came last July when it added the name of Forex Prop Firm. Then, the Ukrainian regulator also flagged BDSwiss, a popular yet controversial contracts for differences (CFDs) broker.
You might also like this Finance Magnates report: “80–100 Prop Firms Shut Down in 2024's Industry Reshuffle.”
Apart from the two prop brands, the other recently added names to the Ukrainian regulator’s warning list include one trading course provider and two others offering trading services with currency pairs, stocks, and cryptocurrencies.
While Alpine Funded operates from Switzerland, Aura Funded appears to have a base in Dubai. As highlighted on the Ukrainian regulator’s website, these are “dubious projects.”
The Future of Prop Firms
The popularity of prop trading firms has skyrocketed in the last few years, although many companies in this sector have been operating for a decade. This, however, has also attracted the attention of regulators.
Prop firms do not qualify as brokers, as they do not handle client money for investment. Rather, they generate most of their revenue from selling challenges, and traders must pass these challenges to receive a funded account. Interestingly, a majority of the industry (except for a handful of brands) follows a demo-account model, meaning they offer trading in a simulated environment even to funded-account holders.
This model has also prompted multiple regulators, including those in Belgium and Spain, to warn against the entire industry. Italy’s Consob even compared prop trading with “video games.” Similar to the Ukrainian regulator, the Indian central bank has also added two prop firms to its warning list.
Earlier, Finance Magnates also reported that the pan-European regulator conducted an initial check on such prop trading firms and discussed possible regulations, while the regulator in the Czech Republic believes that some prop firms might fall under the existing MiFID II framework.
