Tech Vendors Help New Prop Firms Enter Market, But Issues Arise

The proprietary trading industry is growing quickly, with many new firms starting up. Reports revealed that this growth has raised questions about how easy it is to enter the market, how honest the operations are, and what role technology plays in running these firms.

In the past, setting up a prop trading firm needed a lot of money, trading knowledge, and strong management. But now, experts explain that this may no longer be the case. With help from certain technology vendors, it is possible to start a firm with as little as $5,000 and a share of the company’s net earnings.

Prop Trading Firms Aims To Balance Flexibility And Cost In Technology Solutions

Some firms choose to build their own technology even though it is expensive. Siju Daniel, the Chief Commercial Officer of ATFX and its trading branch ATFunded, shared that the firm decided to create its own system for ATFunded.

He explained that while vendors offer good services, his team needed more flexibility. Daniel also said vendors have helped the industry grow by saving time for new firms.

For new companies, using third-party technology is often the easier choice. Vendors provide tested and efficient tools, which is quite cheaper than hiring a team to build systems from scratch.

Yavuz Karadeniz, a director at E8 Markets, explained that using vendor services makes it easier to launch a trading platform. These services handle tasks like managing risks, checking traders, and setting up user-friendly systems.

Jon Light, from Devexperts, agreed that building technology from the ground up is a tough process. Vendors usually offer different services, from managing the whole firm to providing just the technology.

Costs for these services can vary, starting from $5,000 plus a share of the firm’s revenue, or fixed monthly fees that can go beyond $15,000.

The Prop Trading Industry’s Wants To Ensure Data Integrity And Fairness

While vendors bring convenience, they also face responsibilities. According to reports, there are rising concerns about scams in the prop trading industry, leading to questions about whether vendors should check if their clients are trustworthy. Some traders have also complained about getting unwanted services, raising worries about how data is collected and used.

The relationship between vendors and trading firms can sometimes create problems. For example, if a vendor also runs its own trading firm, it might mix its roles, causing fairness issues. Sharing trader data across firms without proper consent can also break trust and laws like GDPR.

Light shared that data, if used correctly, can help firms. For instance, if a trader breaks rules on one platform, vendors can share this information with others to stop rule-breaking. But using trader data for marketing without permission is seen as wrong and could lead to privacy violations.

Experts believe that for the prop trading industry to grow, vendors must keep clear rules. They suggest regular checks and transparent policies to ensure data is used properly and fairly. By doing this, the industry can become safer and more reliable for everyone.