“If you fail to plan, you are planning to fail!” – Benjamin Franklin

When starting a proprietary trading firm, entrepreneurs need to address several areas to set their endeavor up for success. This begins with understanding the regulatory requirements specific to prop trading, which can vary significantly by region. Next, they need to decide on operating strategies and test them for consistent returns. Equally important is investing in technology and infrastructure to support traders’ evaluation, contests, actual trading, and real-time data analysis. Also, a prop firm can’t do without a team of experienced traders, quantitative analysts, and IT specialists for operational efficiency.

This article will provide practical tips to help you plan the launch of your proprietary trading firm.

Planning the revenue model

There are two paths a prop firm might follow. The first is to get revenue from evaluation programs and contests for traders without ever actually providing qualified traders with live accounts. Such firms opt to replicate only a small portion of the positions taken by their successful traders.

The second is the firms that are rare to come by, but they do exist—they give all their traders live accounts after a successfully passed evaluation test.

In both cases, the usual conditions are that a trader keeps their account active if they do not lose more than N amount of money per day and keep the maximum drawdown above a set amount.

Core components of a prop trading firm

Liquidity sources

Remember to focus on liquidity sources for your trading operations. First, conduct thorough research to identify dependable liquidity providers, including banks, financial institutions, and ECNs. Establish formal partnership agreements with these providers to ensure steady access to liquidity. Finally, integrate APIs to connect your trading systems directly with these liquidity sources for smooth and efficient execution.

Liquidity aggregation

When implementing aggregation, it is essential to carefully select a liquidity aggregation software that supports multiple liquidity feeds. Once the software is chosen, configuring the aggregation parameters is crucial. This involves setting up the system to prioritize the best price execution, manage orders, and distribute liquidity efficiently. After the initial setup, continuous testing and optimization are essential to ensure that the aggregation setup can handle market volatility and consistently deliver optimal performance.

Proprietary trading CRM

When setting up a customer relationship management system, it’s important to select one that is tailored for trading firms, as customizations are specifically designed for trading needs. Once the CRM is selected, customizations should be made to effectively handle client onboarding, KYC processes, and account management. Seamless integration with trading platforms and other back-office systems will ensure unified data management.

Prop trading challenge and risk management

To attract and assess traders, it’s essential to design structured trading challenges with clear rules, goals, and rewards. Trading contests and evaluations should be equipped with prop-specific automated risk management, including maximum drawdown, profit targets, position limits, leverage limits, and stop-loss orders. Implementing such risk management software to monitor and control trading activities in real time ensures fair competition.

When actual trading enters the scene, there should be software for continuous monitoring of trading activities to identify and mitigate risks promptly. You should conduct regular stress tests to evaluate how strategies perform under extreme market conditions and update risk management policies regularly to reflect market dynamics and regulatory requirements changes.

Prop fraud controls

Strong fraud controls include using automated systems to monitor transactions for unusual patterns, employing machine learning algorithms to detect anomalies in trading behavior, conducting regular security audits to identify and fix vulnerabilities, and providing employee training on recognizing and reporting fraudulent activities.

Integration with payment service providers

Make your services easily accessible—integrate with multiple payment service providers (PSPs) to offer various payment options such as credit cards, bank transfers, and e-wallets. Additionally, consider partnering with cryptocurrency payment gateways to enable crypto transactions. All payment methods must be secure and compliant with regulatory standards. Implementing software for automated payment reconciliation can help reduce manual errors and streamline the process.

KYC and onboarding

When setting up the KYC and onboarding processes, it’s important to consider automated solutions that utilize AI because it helps verify identities quickly and accurately. Comprehensive compliance checklists ensure that all regulatory requirements are met during the onboarding process, while clear instructions and support to clients during onboarding can facilitate a smooth and efficient KYC completion.

Multiple options for trading platforms

Multiple trading platform options cater to different trader preferences and attract more clients. However, managing various platforms doesn’t mean it will be a hassle—there are tools that help with managing multiple trading systems and integrating their data within a single CRM, risk management, and liquidity aggregation system.


This part for prop trading firms is no different from traditional brokers—marketing must be paramount to bring in new clients. Developing a comprehensive digital marketing strategy includes incorporating SEO, social media, PPC, and content marketing. Collaborating with influencers and thought leaders in the trading community will help enhance a brand’s credibility. Utilizing marketing automation tools to manage and track campaigns for maximum reach and impact is also important. Regular analysis of marketing performance data will help optimize strategies based on insights.

Website and automation of emails

To maximize your online presence and user engagement, make your website efficient and automate email interactions with clients. A professional, user-friendly website that effectively showcases your services and value proposition charged with SEO and content marketing strategies boosts your firm’s visibility and engages visitors. Utilizing email automation tools streamlines your marketing efforts, client notifications, and support communications. Data analytics tools allow you to monitor website performance and assess the effectiveness of email campaigns, enabling data-driven refinements for better results.

Technology management

Various aspects need to be taken care of. These include purchasing and managing domains and making sure all websites have updated SSL certificates for security. Implementing robust cybersecurity measures such as firewalls, anti-virus software, and DDoS protection is essential. It’s also important to establish a dedicated IT support team to handle technical issues promptly and ensure system uptime. Additionally, utilizing cloud services for scalability and reliability is recommended to ensure that your tech infrastructure can handle increased demand.

We suggest relying on your trusted software provider for tech management, as it knows how to handle everything. Whether you’d like to scale your offering or migrate your user base to another platform, it’s better to delegate this task. We know this from our own experience when one of our clients decided to migrate the entire user base without prior notice, and the number of users significantly exceeded the platform’s capacity. Had the client sent us a prior notice, we would have scaled the client’s platform instance horizontally to accommodate the migration.


The number of prop trading firms forced to shut down operations due to violating regulations is staggering. Regulators are vigilant at all times, and so should prop trading firms. Hiring a dedicated compliance officer can help oversee regulatory compliance and ensure adherence to legal standards.

It used to be so that prop firms didn’t need to obtain licenses if they offered only demo accounts. A broker’s license must be obtained if any actual trading activity is involved.


Engaging with industry experts and consultants with extensive experience is essential for thriving in the prop trading industry. Forming an advisory board comprising industry veterans will provide strategic guidance and valuable insights. Continuous learning through industry conferences, workshops, and seminars will help you stay informed about the latest trends and best practices.

If in doubt, go to a consultant. It’s cheaper to pay for their services than losing your entire business.


Implementing these detailed steps will help establish a robust, compliant, and efficient proprietary trading firm. Each component, from liquidity sourcing to regulatory compliance, is crucial in ensuring the firm’s success and sustainability.

The good news is that DXtrade offers a turnkey solution for launching a prop trading firm. We’ve partnered with numerous industry leaders to provide our clients with the tools required to run their businesses smoothly. DXtrade is seamlessly integrated with liquidity providers and hubs, client portal and CRM providers, marketing and analytics tools, and vendors of trading contest and prop trading technology. We also work with firms that offer brokerage consulting and full-cycle prop trading solutions. Here is the full list of DXtrade partners.

By leveraging advanced technologies, expert advice, and continuous improvement, prop firms can navigate the complexities of the financial markets and achieve long-term profitability.