Is Proprietary Firm Trading near to its extinction?
Reading Time: 3 minutes Financial activity: Trading Knowledge level: all
Summary
The CFTC against Proprietary Firms
The move implemented by CFTC
Conclusions
The CFTC against Proprietary Firms
If you don't know what Prop Trading is, you can read this post of mine, with my thoughts on it: My thinking on Prop Firm Trading.
The Commodity Futures Trading Commission (CFTC) is a U.S. Government Agency that regulates the futures and foreign exchange markets.
The CFTC's goal
is to protect investors/traders and ensure market fairness and transparency.
The CFTC has
been investigating Prop Firms Companies for several years.
CFTC is
concerned about potential fraud and other illegal activity in the Prop Company industry,
but it has not yet made any final decisions about how to regulate the Prop Firm
industry.
The defense of
the Prop Firms is to say that they are offering demo accounts with virtual
money to traders, so they do not break any of the restrictions imposed by the
CFTC.
The move implemented by CFTC
Since it is
difficult to impose rules on those who offer demo accounts to traders, the
opinion that has spread on the internet is that CFTC has implemented a
surprising, but very effective and intelligent move: it has begun to put
pressure on the software houses that produce the trading platforms adopted by
Prop Firms.
Nobody thinks fighting the CFTC is a good idea, so MetaQuotes, the software development company of MetaTrader 4 (MT4) and MetaTrader 5 (MT5), is suggesting the brokers that are using its licenses (Blackbull Markets, ThinkMarkets, Eightcap, etc.) to terminate their services to Prop Firms (this is my post on MetaTrader 4: MetaTrader 4 forever).
At the moment, Prop
Firms that are offering MetaTrader 4 and MetaTrader 5 suspended their activities
and they no longer accept US customers.
To restart
their business they are now looking for alternative platforms to offer
customers (like cTrader or DXTrade).
Conclusions
A perfect (deadly?) storm is hitting Prop Firms these days!
Brokers partner
are terminating their services and MetaQuotes is shutting down its MetaTrader
servers.
Prop Firm's
clients from the USA can no longer use MT4 and MT5.
US customers are
not anymore accepted.
Is it possible to think of replacing MetaTrader 4/5
with other trading platforms?
What happens if
they too are convinced to withdraw their software, so as not to antagonize the
CFTC?
However, is it also possible that the CFTC's investigations
and regulations have a positive impact on the industry, in the long term, by
legitimizing it?
In conclusion, is Prop Trading near to extinction?
I think that we will have all the answers in a very few
time (days or weeks). Certainly, this industry will be greatly reduced.
Stay informed by reading the news reported in this link of Finance Magnates: Prop-trading.
A sincere wish
of good work to all!
Written by F.
GRAMOLA (*).
(*) Member of
S.I.A.T., the Italian Society of Technical Analysis (member society of I.F.T.A.
– International Federation of Technical Analysts).
Warning
We merely cite
our personal opinions for educational purposes only.
All trademarks
are the property of their respective owners.
Investing and
trading are risky. Don't invest or trade money that you cannot afford to lose.
Initial Photo by Josep Castells on Unsplash
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