What is a proprietary trading firm, and how is it different from a broker?
Quick answer
A broker executes clients' orders on the market and earns from spreads, commissions or client losses. A proprietary trading firm does not take client deposits for trading; it evaluates traders and pays a share of profits to those who pass, using its own capital or simulated accounts.
Detailed answer
The difference shows up in who owns the money and what the customer is buying.
- A broker holds client funds, routes or internalises their orders and is normally licensed by a financial regulator to do so. The client trades their own money.
- A prop firm sells access to an evaluation. The trader's fee buys the right to prove themselves on an account the firm controls. The trader is not depositing trading capital.
Because many modern prop firms run evaluations and often funded accounts on simulated execution, they usually do not hold client money the way a broker does. That is why most of them do not hold a brokerage licence, although regulators in several countries are looking more closely at the model, and the legal position depends on where you operate and how you describe your product.
A practical consequence: a prop firm needs technology that simulates fills accurately against live prices and enforces rules, not an order-routing stack. PropExecutor is built that way. It fills orders against a live price feed in simulated accounts and never routes them to a market.
PropExecutor team · Updated