Which Prop Firm Is Regulated?

What Is a Prop Trading Firm?

Definition of Proprietary Trading

Proprietary trading firms, affectionately called “prop firms” in trader circles, are financial powerhouses that allow traders to use the firm’s capital instead of risking their own. Picture this: you’re trading with big money without draining your personal savings account—because the firm backs you.

This means traders focus on growing firm capital in return for a share of profits. Think of it as playing poker with someone else’s chips—if you win, you split the pot. If you lose, you don’t go broke.

How Prop Firms Operate

Prop firms evaluate traders through simulations or challenges. If you pass, you get funded. It’s not unlike trying out for a sports team: show skill, earn a jersey (or in this case, a funded account). Most firms use demo environments for evaluations, but once funded, you’re often trading live capital.

In return, firms take a share of your profits—usually ranging from 10% to 50%, depending on the structure. The model rewards both parties: you trade with high capital, and they scale their revenue by backing high-performers.

Difference Between Prop Firms and Brokers

Prop Firms

• Use their own capital
• Share profits with traders
• Often regulate risk and impose drawdown rules

Brokers

• Offer access to markets for a fee
• Earn via commissions or spreads
• Rarely take on direct market risk

So, if brokers are like gym owners, prop firms are like professional teams offering a contract to proven athletes.

Are Prop Trading Firms Regulated?

What Regulation Means for Prop Firms

Regulation in the trading world is like referees in a game—it ensures fairness, transparency, and trust. For prop firms, regulation involves oversight from national or regional financial bodies that monitor how firms handle client data, capital exposure, anti-money laundering policies, and fund safety.

A regulated prop firm must meet strict capital requirements, operate under compliance frameworks, and allow for independent audits—meaning they’re much less likely to ghost you with your earnings.

Regulatory Bodies by Region

• United States: NFA, CFTC
• United Kingdom: FCA
• European Union: ESMA, BaFin
• Australia: ASIC
• Canada: IIROC, OSC
• Dubai: DFSA

These bodies keep the wild west of trading in check. Regulated firms have to toe the line, reducing the chance of traders getting rug-pulled.

Why Regulation Matters for Traders

• Safety First: Firms must follow rules about how funds are handled.
• Dispute Resolution: Regulated firms provide legitimate channels to resolve issues.
• Transparency: Publicly listed licenses and audited financials offer peace of mind.
• Credibility: You can sleep better knowing your payout isn’t at the mercy of shady business practices.

Fully Regulated Prop Trading Firms in 2025

Top Tier 1 Regulated Firms

Here are some of the top regulated prop firms leading the pack in 2025:

• The5ers – Regulated through their brokerage partner, this veteran firm focuses on Forex and low-risk capital scaling.
• DNA Funded – Tied to DNA Markets, an ASIC-regulated broker in Australia, offering full transparency.
• BrightFunded – Offers equity-style funding with a performance-based evaluation, under regulated oversight.
• BluFX – FCA registered in the UK and well-known for real capital allocations.
• FTUK (Funded Trading UK) – Provides verified FCA information and robust UK-based protections.

Licensing and Compliance Breakdown

Each of these firms is either directly regulated or partners with a regulated brokerage. Look for:

• License numbers on homepages
• Links to public regulator directories
• Disclosures about fund handling and trader agreements
• Segregated accounts for client payouts

How to Verify a Prop Firm’s Regulatory Status

• Go to the regulator’s site (e.g., FCA, ASIC).
• Search the firm’s name or license number.
• Confirm their registration status, license type, and current standing.
• Review the firm’s disclosures on their official site.

If a firm claims regulation but isn’t listed—🚩 red flag.

What Makes a Prop Trading Firm Legit or Safe?

Red Flags of Unregulated Firms

Avoid firms that:

• Don’t show any licensing info
• Offer unrealistic returns or “guaranteed profits”
• Hide behind P.O. boxes or unverified offshore addresses
• Have overwhelmingly negative reviews or lack online presence

It’s like dating someone who won’t tell you their last name. Something’s fishy.

Traits of Reputable and Transparent Firms

• Clear regulatory affiliation
• Transparent fee structures
• Strong, multi-channel support (email, chat, phone)
• Verified trust signals (Trustpilot, Reddit community feedback, verified testimonials)

Reputable firms are like a reliable trading platform—fast, transparent, and dependable.

Importance of Fund Security and Trader Protection

Regulated firms:

• Use segregated bank accounts for trader profits
• Follow AML and KYC guidelines
• Offer dispute resolution through governing bodies
• Have insurance or compensation schemes in place

You want to trade knowing your funds are safe, not praying the payout button works.

Comparison Table: Regulated vs. Unregulated Prop Firms