A prop firm — short for proprietary trading firm — is a company that provides traders with access to capital to trade financial markets, in exchange for a share of the profits generated. In the traditional sense, a prop firm employs traders directly and deploys the firm’s own capital in live markets. In the retail context, the term is now widely used to describe simulated-capital evaluation programs that assess trader performance before granting a funded account.
The two models are structurally different, and the distinction matters for anyone entering the space.
Traditional prop firms versus retail evaluation programs
Traditional prop firms — such as trading desks at financial institutions or standalone shops — employ traders, provide real capital from the firm’s own balance sheet, and share profits from actual market activity. Traders at these firms are typically subject to formal employment relationships, salary structures, and regulatory oversight.
Retail evaluation programs (the category that FundedProp and most consumer-facing “prop firms” operate in) provide access to simulated demo accounts. Traders pay an evaluation fee, complete an assessment on simulated capital, and — if they pass — receive a funded account that is also simulated. Performance rewards are calculated on simulated results and funded from program revenue, not from real-market trading. No real capital is provided to or traded by participants at any stage.
Why the distinction matters
The retail evaluation model operates in a different regulatory environment than traditional prop trading. Regulators in several jurisdictions have scrutinised the category and in some cases taken action against firms that misrepresented the nature of their accounts. A program that states plainly that all accounts are simulated and that no real capital is provided is operating transparently. One that implies real-market participation without clear disclosure is not.
Before purchasing any evaluation, confirm in the program’s published terms: whether accounts are simulated or live, how performance rewards are calculated and funded, and what jurisdiction the operator is registered in.
The evaluation model’s commercial structure
In the retail evaluation model, revenue is generated primarily from evaluation fees. Industry data suggests pass rates of roughly 10–15% across the category, meaning the majority of evaluation fees are not returned as funded account rewards. This economics is not inherently problematic — it is how the model works — but traders should understand it. The evaluation is a paid assessment, not a guaranteed path to capital.
For related terms, see funded account, evaluation fee, simulated trading, profit split, and evaluation phase.
FundedProp provides simulated trading evaluations. All accounts are demo accounts; no real capital is traded by participants. This is not investment advice.