With the rapid rise of proprietary trading, brokers are capitalizing on a shift in the market landscape—one that’s forcing them to rethink their role in retail trading and adapt to the growing demand for better funding options.

The drivers behind FX/CFD prop firms

The rise of FX/CFD prop firms comes as a direct result of several converging trends in the industry. First, regulatory tightening in regions like the EU has made it harder for brokers to continue offering certain types of leveraged products to retail clients. In particular, tightening margin requirements and restrictions on leverage have pushed many brokers to seek alternative ways to generate revenue while still meeting client demands. By offering proprietary trading, brokers can circumvent these limitations, providing a fresh avenue for traders to engage with leveraged products—without the restrictions that come with traditional retail trading accounts.

Another key factor driving the rise of prop trading among brokers is the growth in retail trading interest since the 2020 pandemic. Prop trading, which allows traders to use a firm’s capital to trade financial instruments, has found a receptive audience, particularly as more retail investors look for ways to scale their trading activities without putting up substantial personal capital. According to a recent survey by PipFarm, 65% of prop traders entered the market post-2020, with a majority starting with FX and CFDs.

There’s a simple reason why so many traders begin their trading careers with CFDs and FX: accessibility and familiarity. These products offer relatively low barriers to entry, with brokers providing leverage and smaller contract sizes to cater to the retail audience. For new traders, CFDs, especially in forex, provide the flexibility to trade on price movements without owning the underlying assets. They’re ideal for beginners who want exposure to financial markets without the complexities of more traditional asset classes like equities or commodities.

In addition to these advantages, traders can also bypass some of the restrictions imposed on retail CFD products by entering a prop firm. Prop firms often allow for greater flexibility in terms of leverage, risk management, and the products available for trading. The prop model makes it possible for traders to access better capital allocation, often on terms more favorable than those provided by traditional CFD brokers. These factors contribute to the growing popularity of prop firms within the retail trader community.

Navigating the negative conversations around prop firms

There’s been no shortage of negative conversations surrounding proprietary trading firms in recent years. Criticisms often center on issues like overly complex rules, sudden policy changes, or complaints about unfair profit splits and payout rejections. However, these challenges are unlikely to derail the growth of prop firms. In fact, they’ve sparked increased demand for transparency and accountability in the space—both of which broker-backed prop firms are well-positioned to provide.

The rise of broker-backed prop firms is a direct response to these concerns. Broker-backed firms, often seen as more stable due to their regulatory oversight and established operational structures, are garnering the trust of traders. A recent PipFarm survey highlighted that nearly 60% of prop traders believe broker-backed firms offer better risk management and infrastructure, with only 14% disagreeing. Broker-backed prop firms are attracting traders with clear rules, fast withdrawals, and proof of payouts, which are key to overcoming the negative reputation associated with the broader prop trading industry.

The power of broker-backed prop firms

Brokers such as Axi, OANDA, and IC Markets have been quick to launch their own prop trading brands, including Axi Select, Labs Prop Trader, and IC Funded, respectively. The involvement of well-established brokers lends credibility to the prop trading model, addressing concerns about financial backing and internal controls. It’s no surprise that a majority of traders now prefer broker-backed prop firms, as these firms offer better trust, transparency, and operational integrity compared to independent entities.

This trend is reinforced by the increasing regulatory scrutiny on prop trading, particularly in regions like the EU (especially Italy, Spain, and the Czech Republic). As regulators clamp down on unregulated firms, those with established relationships with reputable brokers stand to benefit, ensuring their survival and growth in a competitive marketplace.

Technology: In-house vs. external solutions

When it comes to technology, brokers launching prop firms have a clear preference for in-house solutions. Prop firms that use proprietary technology rather than relying on external platforms are seen as more reliable. In a recent survey, 61% of traders agreed that in-house technology enhances a firm’s credibility, with only 8% disagreeing. Prop firms prefer in-house technology due to the greater control it offers over platform performance, risk management, and overall user experience.

Brokers entering the prop trading space are thus leveraging their in-house tech expertise to create custom solutions that cater to the specific needs of prop traders. This shift toward proprietary technology is not just about offering more robust systems—it also helps enhance the overall reputation of the industry, as broker-backed firms prioritize the quality and reliability of their platforms.

A balanced path to technology: Customization meets speed

While many brokers emphasize in-house solutions, off-the-shelf platforms like DXtrade offer a compelling alternative for launching prop firms. DXtrade combines the benefits of proven, scalable technology with the flexibility to customize or even acquire source code for complete in-house integration. This approach bridges the gap between speed and control, allowing brokers to deploy a time-tested trading platform without the delays or complexities of developing proprietary systems from scratch.

Designed with built-in risk management and high operational performance, DXtrade ensures brokers can focus on growth and compliance rather than infrastructure. By leveraging such adaptable platforms, brokers can align with traders’ expectations for reliability while maintaining the operational agility needed to succeed in the competitive prop trading space.

The future of FX/CFD prop firms

The launch of FX/CFD prop firms by established brokers marks an important evolution in the financial services sector. Despite negative perceptions, the industry is adapting, improving transparency, and creating safer, more reliable environments for traders. The combination of trusted regulatory oversight, better risk management, and custom technology positions broker-backed prop firms to continue growing, offering traders both the opportunity and the tools to succeed.

With the ongoing demand for alternative ways to trade, particularly among those starting with CFDs and FX, broker-backed prop firms are here to stay—resilient against criticism and ready to meet the evolving needs of today’s traders.