Do I need a financial licence to run a prop firm?

Factors that tend to keep a firm outside licensing:

• Traders pay for an evaluation, not a deposit into a trading account.
• Accounts are simulated, with no orders sent to a real market.
• The firm does not manage money on behalf of traders.
• Payouts are performance rewards under the firm's terms.

Factors that can bring licensing into play:

• Executing traders' orders in real markets on their behalf.
• Holding client funds or offering leverage on real positions.
• Marketing that resembles investment or brokerage services.
• Operating in a country whose regulator has decided evaluations fall within its rules.

The position is not uniform worldwide and has been debated by regulators in several countries. This is general information, not legal advice; a lawyer who knows your target markets should confirm your structure.

Keeping the position clear

The simpler your model, the easier the analysis: evaluations sold for a fee, simulated execution, payouts under clear terms. Each extra activity, such as real execution for funded traders, should be reviewed before you add it.