The prop trading industry keeps taking blows as firm after firm keeps getting into trouble. Having landed squarely on the watchlist of pertinent regulators across the globe, from the USA to the EU, where recently the Belgian FSMA has issued a warning against prop trading firms, there seems to be an unending flow of bad news for specific retail prop firms being forced to suspend or shut their operations and leaving traders in the dark and hanging.
The latest episode to this saga comes as the Funded Trader, a renowned proprietary trading firm, finds itself at a crossroads as it grapples with a series of challenges.
In response to mounting concerns from its clientele regarding payout discrepancies and a lack of responsive customer service, the company has opted to hit the pause button on all operations, hinting at an imminent relaunch. This strategic move, as articulated by CEO Angelo Ciaramello, aims to rejuvenate the brand with a fresh aesthetic and enhanced functionality, with ongoing communication promised to keep stakeholders abreast of the unfolding changes.
Furthermore, amidst swirling accusations of credit card fraud and the utilization of unauthorized trading tactics, the firm has taken the unprecedented step of halting all payouts, citing an internal audit initiative. This decision, though internally motivated, has sparked additional scrutiny and skepticism from both within and outside the trading community. Notably, Ciaramello's characterization of the complaints as "propaganda" has only served to stoke the flames of discontent, resulting in a wave of backlash across social media platforms.
To make things worse, only a day after this announcement, another player in the proprietary trading arena, Skilled Funded Traders, has taken down its website replacing it with a message of temporary cessation of operations. The abrupt halt includes the suspension of new purchases, effective immediately.
Their message conveys regret for the inconvenience caused and expresses gratitude for the patience and understanding of their clientele during this uncertain period. Promising individualized follow-ups over the next week, they aim to provide clarity on the path forward and explore alternatives to resume normal operations. Interestingly, both The Funded Trader and Skilled Funded Traders seem to share a connection with Easton Consulting Technologies, headquartered in Miami, Florida. Easton's online presence, showcased on their website eastontech.net, highlights their role in launching and scaling top-tier "Evaluation Firms."
The exact nature of the relationship between Easton and these proprietary trading entities remains ambiguous. While it's unclear whether Easton owns and operates both brands independently or merely provides technological and strategic support as a white-label provider in the prop firm space, CEO Carlos Rico-Ospina's affiliation adds another layer of intrigue. Rico-Ospina's dual role as CEO of Easton Consulting and CFO at The Funded Trader since 2021 raises questions about potential synergies or dependencies within this ecosystem of prop trading ventures.
For traders navigating the tumultuous waters of proprietary trading, these developments serve as a stark reminder of the importance of due diligence. Beyond the allure of potential profits, considerations of stability and reliability must take precedence when selecting a prop firm to partner with. Stay vigilant, stay informed, and proceed with caution in the ever-evolving landscape of financial markets.
Challenges currently faced by proprietary trading firms
To be able to avoid loopholes as an existing or aspiring prop trader, you first need to be aware of the challenges and disruptions that prop firms are faced with, which are reshaping the dynamics of the financial markets. Here's an exploration of some noteworthy issues:
Regulatory Changes and Scrutiny
- Prop trading operations have come under intense regulatory scrutiny, particularly in the aftermath of the 2008 financial crisis. Regulatory bodies are keen on bolstering market stability and transparency.
- Notably, MetaQuotes, the developer behind widely-used trading platforms like MT4 and MT5, has ramped up its oversight over brokers and prop trading firms catering to US clients. This shift in policy has resulted in abrupt closures of trading services by certain prop firms, illustrating the impact of regulatory changes on industry operations and viability.
Market Volatility and Economic Downturns
- Recent months have witnessed a surge in the closure of brokerage businesses and prop firms, largely attributed to heightened market volatility and economic downturns.
- Prop trading firms, being inherently sensitive to market fluctuations, are susceptible to substantial losses during periods of heightened volatility, further exacerbating the challenges faced by these entities.
Technology Disruptions
- The prop trading landscape has been disrupted by unforeseen technological shifts, necessitating firms to swiftly adapt to new tools, platforms, and infrastructure.
- This technological evolution adds layers of complexity to the trading environment, requiring firms to continuously innovate and upgrade their technological capabilities to remain competitive.
Business Closures and Impact on Traders
- The closure of proprietary trading firms and brokerages has been witnessed across the industry due to various factors.
- Traders affiliated with these firms often find themselves grappling with disruptions in their trading activities, forcing them to navigate through uncertain terrain and adapt to shifting market conditions.
In a nutshell, currently the prop trading industry is entrenched in a multifaceted and challenging environment, characterized by regulatory complexities, market volatility, technological disruptions, and business closures. Amidst these challenges, the ability to adapt, ensure regulatory compliance, and effectively manage risks remains imperative for prop firms seeking to thrive amidst uncertainty.
What should be prop firms be doing against this backdrop?
Unlike retail trading where traders invest in their trades and brokers act as the facilitators for the transaction, in prop trading prop firms fund traders to harness their skills and then they share the ensuing profits. This is what makes the relationship between prop firms and prop traders unique; it is in fact, or at least it should be, a partnership and as such it should be based on honesty and mutual respect. To be worthy of your trust and respect as a trader and potential partner then, a prop firm should pay particular attention to the following:
Transparency and Clear Rules
- Prop firms should maintain transparent and well-defined rules for their traders. Clear guidelines on risk management, profit sharing, and performance evaluation are essential.
- Traders deserve to know how their performance is assessed and what criteria determine their funding eligibility. Transparency fosters trust and ensures fairness.
Risk Mitigation and Support
- Prop firms should provide risk management tools and education to traders. This includes setting maximum daily loss limits, risk exposure guidelines, and risk assessment training.
- Offering support during drawdowns or challenging market conditions demonstrates accountability. Traders should feel that the firm has their back.
Profit Sharing Structure
- Fair profit-sharing arrangements are crucial. Prop firms often split profits with traders, but the terms can vary significantly.
- A balanced split that rewards traders for their performance while allowing the firm to cover operational costs ensures fairness.
Performance Evaluation Consistency
- Prop firms must consistently evaluate trader performance. Deviations from established evaluation criteria can lead to disputes.
- Regular reviews, feedback, and a standardized process contribute to fairness.
Clear Funding Paths
- Traders should understand the path to becoming a funded trader. Clarity on how to progress from challenges to funded accounts promotes fairness.
- Prop firms should communicate funding milestones clearly.
Ethical Behavior and Professionalism
- Firms should adhere to ethical standards in their interactions with traders. This includes timely payouts, respectful communication, and fair treatment.
- Professional conduct builds trust and accountability.
Risk Disclosure and Education
- Prop firms should educate traders about the risks involved in trading. Full disclosure of potential losses and market volatility is essential.
- Accountability lies in ensuring traders are well-informed before they start trading.
Adaptability and Flexibility
- Prop firms should adapt to changing market conditions and technological advancements. The rigidity can harm traders.
- Being flexible in adjusting rules and policies when necessary demonstrates fairness. In summary, prop firms play a critical role in shaping traders’ careers. Fairness, transparency, and accountability are foundational principles that benefit both traders and the firms themselves
In the aftermath of the Funded Trader saga: the way forward
To return to the unfortunate events with regard to TFT and its collapse, it is understandable that its partner-traders have found themselves in a difficult position. The encouraging element however, for TFT traders as well as for the entire prop industry comes from the reaction of certain other players in the prop field, who seem to have sincerely realized that there is only one way forward for prop traders and prop trading firms. One such example is the swift reaction of FunderPro, a proprietary trading firm, that already prides itself on funding traders with real capital and providing live STP (Straight Through Processing) accounts once traders get funded. They claim to be the only Prop Firm to offer this, ensuring faster processing times without requotes or dealing desk interference. It is thus both interesting and encouraging that immediately after the Funded Trader traders were hit with the news of TFT’s ceased operations, the FunderPro team entered into discussions with the TFT leadership advocating on behalf of the affected traders and demanding immediate solutions to the issues that have arisen.
In fact, FunderPro’s co-founder Owen Morton has reached out via a video message, urging all affected TFT with outstanding payouts to submit their claim to FunderPro who undertakes to help them out in the swift resolution of the situation.
Going a bold step further, in his message FunderPro’s co-founder admitted that the TFT saga is not an isolated incident but instead yet further proof that the prop industry is plagued by murky practices, questionable ethics, and a significant lack of transparency. Thus, he has put out a strong call for more integrity and transparency in the industry as a whole and has urged all stakeholders to join their efforts to create an environment that is fair, transparent, and ethical and where prop firms provide real accountability and real support towards traders.
In his view, the main cause of current problems is the absence of real funds, highlighting FunderPro’s commitment “to funding traders with real money, ensuring aligned interests between traders and our firm, unlike the simulated funds that have become all too common.” Having recognized that prop trading may be very beneficial for skilled traders and having showcased its growth in recent years, the start-business-online team hopes that the affected traders of TFT will be offered answers and resolution with regards to payouts. We are also here to help out and guide any trader be they partners with TFT, Skilled Funded Traders, or any other firm which faces problems. So, do feel free to contact us and we will do our best to help out. As a proactive step towards protecting the community and helping traders identify potential forex prop trading scams we have also compiled a page exhibiting numerous red flags commonly associated with forex prop scams.
We also sincerely hope that the prop industry will soon move on to a better future, based on mutual trust and respect, transparency and fairness, all values necessary for any partnership to be fruitful. The interests of prop firms do align with those of prop traders and it is high time that all prop firms realize this and adjust their practices accordingly.
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So which Firms are better than The Funded Trader for January 2025?
