The Future of Prop Firms: Where the Industry Is Headed

Prop trading is changing fast. Here's what you need to know:

• Massive closures in 2024: 80–100 firms shut down, cutting the market by 13–14%. Survivors thrived on strong tech, solid business models, and real capital.
• AI is taking over: Firms now use AI for real-time risk management, fraud detection, and automated evaluations, replacing outdated manual processes.
• MetaTrader's decline: Its market share fell from 48% to 24% after 2024 restrictions, pushing firms to adopt multi-asset platforms.
• New funding models: Firms now focus on long-term trader retention with performance-based scaling and fast payouts.
• Regulation tightening: New rules like the 2025 Margin Adequacy Rule are reshaping firm operations and compliance.

Key takeaway: Success in 2026 relies on mastering advanced tools, choosing reliable firms, and treating trading as a professional career.

Let’s break it all down.

New Technologies Changing Prop Trading

In today's fast-paced trading landscape, technology isn't just an advantage - it's the dividing line between firms that thrive and those that falter. As Axcera puts it:

"In prop trading, technology is not a luxury, it is a core competitive asset".

Top firms are doubling down on AI-powered risk systems, automated evaluations, and cutting-edge infrastructure - tools that were once exclusive to big banks. These advancements are reshaping the industry, with AI, automation, and advanced trader tools leading the charge.

By 2023, 99% of financial leaders had implemented AI, and the share of AI-related patent applications in algorithmic trading surged from 19% in 2017 to over 50% annually since 2020.

AI and Machine Learning in Trading

AI is revolutionizing prop trading from the ground up, transforming how firms handle risk and make decisions in real time. Instead of waiting to analyze losses after the fact, AI can continuously monitor drawdowns, position sizes, and market exposure across thousands of accounts simultaneously.

"AI's most critical role will be in real-time risk management. AI models can constantly monitor a trader's performance and market exposure, automatically identifying and mitigating potential issues before they become major problems." – BrightFunded

Large Language Models (LLMs) are another game-changer. They process unstructured data - like news headlines or social media trends - and turn it into actionable trading insights within seconds. For example, during key economic events like Federal Reserve announcements, AI can analyze lengthy reports and predict price movements in just 15 seconds, far outpacing human analysts.

Emerging "agentic workflows" take things further. Systems like QuantAgent and TradingGPT deploy multiple AI agents - each acting as a researcher, critic, or executor - to simulate and refine strategies before any real money is at stake. These systems not only test assumptions but also provide detailed audit trails for every decision.

AI is also a powerful fraud detector. It identifies suspicious patterns, such as coordinated account farming or signal mirroring, that manual reviews might miss. On top of that, AI-driven backtesting and pattern recognition allow firms to tailor evaluation criteria to different trading styles, moving away from rigid, one-size-fits-all metrics.

Automated Evaluation Systems

Automation has redefined how traders are evaluated, ensuring consistency and real-time oversight across thousands of accounts. Dashboards now track critical metrics like drawdowns, leverage, and position sizes in real time, helping firms catch potential rule violations before they escalate.

AI models are adept at distinguishing between sustainable, payout-focused trading and riskier, high-variance strategies. This distinction matters, as market analyst Kathy Lien explains:

"The tactics required to pass an evaluation are not the same as those required to sustain payouts".

These systems also flag when traders alter their strategies after passing evaluations, identifying behaviors that may signal unsustainable practices.

Automation has streamlined back-office operations too. Tasks like P&L validation and payouts are now handled by AI, allowing firms to scale operations without adding staff. This efficiency enables faster payout cycles - some firms even offer daily or instant funding options by leveraging AI to assess performance in real time.

The results speak for themselves. In 2023, firms like XTX Markets, Jane Street Capital, and Hudson River Trading demonstrated the potential of these systems:

• XTX Markets: Managed $250 billion in daily trading volume, earning £1.5 billion in profits.
• Jane Street Capital: Generated $10.6 billion in net trading revenue across 200 venues in 45 countries.
• Hudson River Trading: Achieved nearly $8 billion in revenue by deploying automated strategies across over 200 markets, including futures, fixed income, and crypto.

Professional-Grade Tools for Individual Traders

These technological advancements are no longer limited to institutions. Platforms now provide individual traders with access to tools that were once reserved for the pros. For example, Axcera offers integrated risk management, automated payouts, and ultra-low latency execution. Similarly, DeepCharts delivers advanced order flow analysis, which relies on high-performance connectivity for real-time effectiveness.

A shift toward A-book execution models is also changing the game. Platforms like Neurocloud-X connect traders directly to live liquidity markets rather than simulated environments, offering genuine market exposure. Their Stratus strategy model, priced at $14,995, provides institutional-grade algorithmic trading for MT5, handling capital exposure and risk thresholds automatically.

Multi-asset trading has become a standard feature. Individual traders can now manage Forex, equities, crypto, and options within a single platform - mirroring the cross-asset flexibility long used by hedge funds. The algorithmic trading market's valuation, which exceeded $21 billion in 2024, underscores just how widespread these tools have become.

AI-driven ETFs further highlight this shift. These funds rebalance their holdings about once a month, compared to the once-a-year adjustments typical of traditional actively managed equity ETFs. This agility reflects how AI is reshaping trading behaviors across the board.

Changes in Capital Funding Models

Prop trading is undergoing a major transformation, moving away from one-time challenge fees toward longer-term, performance-driven partnerships. Instead of focusing on short-lived challenge attempts, many firms are now fostering ongoing relationships through performance-based scaling and more flexible payout structures. These changes reflect a broader shift toward practices that prioritize traders' success over quick turnover. As Axcera aptly states:

"The future of prop trading is not challenges. It is retention."

This shift is critical because the traditional model has shown significant limitations. Historically, only 14% of traders pass evaluations, and a mere 7% ever receive payouts. Even for those who succeed, the average earnings hover around $7,000, equivalent to just 4% of their account size. Recognizing the flaws in this approach, firms are now focusing on retaining profitable traders, which creates more stable revenue streams than constantly cycling through failed attempts. This change is laying the groundwork for models that reward consistent performance and build stronger partnerships with traders.

Performance-Based Scaling

With performance-based scaling, traders can access larger virtual capital allocations as they demonstrate consistent success. Typically, firms increase capital by 25% every three to four months when traders meet specific profit targets. For instance, a trader who starts with a $50,000 account might scale up to $500,000 or more over time, with profit-sharing rates climbing as high as 90% or even 100%.

This model shifts risk management from being reactive to proactive. Only traders who consistently execute their strategies and manage risks effectively are granted these capital increases. By offering clear growth incentives, scaling plans are helping firms address retention issues. Coupled with these scaling opportunities, faster and more flexible payout systems further strengthen the trader-firm relationship.

Flexible Payout Models

Fast and flexible payouts have become a critical factor in determining a firm's credibility, especially after the collapse of over 80 firms in 2024 due to liquidity problems. Leading firms now offer payouts as quickly as Day 1 or within 24 hours, easing the financial strain that traders previously faced. For example, FundedNext compensates delayed payouts with a $1,000 bonus.

More frequent payout schedules, such as weekly or bi-weekly disbursements, also alleviate the stress of waiting for monthly targets and give traders more control over their cash flow. This shift has had a profound psychological impact. Funded trader Sofia R. shared her experience:

"The psychology changed when I realized I wasn't gambling my rent money".

Using HMarkets' $50,000 instant funding program, Sofia replaced her teaching salary and earned $10,960 under an 80% profit-sharing agreement.

As of early 2026, top firms have collectively paid out over $1 billion to traders. FTMO leads the pack, having distributed $450 million over a decade, while Apex Trader Funding has paid $378 million in just three years. In April 2025, Apex set a record with a single-day payout of $2,552,800.50 to one trader, verified through bank wire and public leaderboards. These transparent and rapid payouts are restoring trust in an industry that has faced its share of skepticism.

Market Diversification and Asset Class Expansion

Prop trading has evolved to include a wide range of markets like Forex, stocks, futures, cryptocurrencies, commodities, and equity options - all accessible through a single platform. This broader scope helps firms attract a diverse group of traders while creating more stable revenue streams by reducing reliance on any one market. Interestingly, this shift has also contributed to a noticeable decline in MetaTrader's dominance, reflecting a significant change in industry preferences.

In 2024, MetaTrader's market share among prop firms fell sharply - from 48% to 24% in just nine months - as firms embraced platforms capable of supporting multiple asset classes. Meanwhile, established brokers like IC Markets and OANDA have expanded their services. In March 2024, IC Markets introduced "ICFunded", offering account sizes from $5,000 to $500,000 with entry fees starting at $29.75. Similarly, in January 2024, OANDA launched its "OANDA Prop Trader" program via its British Virgin Islands entity, providing accounts up to $500,000 and profit splits as high as 90%.

Access to Multiple Asset Classes

Prop firms now integrate various markets into a single system, enabling traders to manage Forex, equities, and crypto without needing to switch platforms. The range of instruments available has grown significantly:

Asset Class	Instruments	Platforms
Forex	Major/Minor pairs, Exotics	MT4, MT5, cTrader, DXtrade
Futures	CME, Equity Indices, Oil, Gold	NinjaTrader, Tradovate
Crypto	Bitcoin, Ethereum, Altcoins, CFDs	TradeLocker, DXtrade, MT5
Equities	Individual Stock CFDs, Blue Chips	MT5, Match-Trader, TradingView
Commodities	Metals (Gold/Silver), Energies	cTrader, MT4, MT5

Pricing models differ widely across asset classes. For example, around 80–90% of futures-focused firms adopt monthly subscription "seat fees", which range from $49 to $360. In contrast, only 30–40% of Forex-focused firms have adopted this pricing approach. The financial success of this model is evident - FTMO reported over $213 million in turnover in 2023, showcasing the profitability of multi-asset platforms. This expanded access gives traders the flexibility to adapt quickly to changing market conditions.

Increased Trading Flexibility

The availability of multiple asset classes reshapes how traders engage with the markets. As Axcera puts it:

"A broader range of assets means prop firms can offer more opportunities and spread risk. If forex markets are quiet, traders can turn to indices or cryptocurrencies, and vice versa."

This diversification not only spreads risk but also allows traders to adopt multi-strategy approaches that meet the industry's evolving standards. For instance, when European Forex markets are sluggish, traders can pivot to active U.S. equity indices or the 24/7 cryptocurrency markets, reducing reliance on any single market.

However, trading across different asset classes often comes with unique challenges, such as restrictions on news trading or holding positions overnight. Additionally, traders may need specialized platforms for optimal execution - NinjaTrader for futures, cTrader for advanced Forex depth, or TradeLocker for streamlined crypto trading. Navigating these complexities requires strong risk management skills and a thorough understanding of each market's nuances.

Regulatory Compliance and Industry Standards

The prop trading industry is navigating a wave of regulatory changes as agencies like the CFTC, SEC, and IRS reshape operational frameworks. One major update is the Margin Adequacy Rule, effective March 24, 2025. This rule requires Futures Commission Merchants (FCMs) to block fund withdrawals if doing so would cause a customer's account balance to dip below the initial margin requirements. Meanwhile, the CFTC is considering whether prop firms engaged in futures trading should be classified as Commodity Trading Advisors (CTAs). Such a reclassification would bring new obligations, including mandatory registration, capital thresholds, and formal audits. Similarly, the SEC's expanded dealer definition (Rules 3a5-4 and 3a44-2), adopted in February 2024, could compel certain prop firms to register with the SEC and FINRA, alongside meeting strict net capital requirements. To adapt, many firms are turning to automated margin controls and real-time monitoring systems.

Another significant update comes from the CFTC's Staff Advisory 24-17, issued on December 5, 2024. It underscores that firms using AI for trading or risk management remain fully accountable under the Commodity Exchange Act:

"CFTC‐regulated entities must maintain compliance with applicable requirements whether they choose to deploy AI or any other technology, either directly or by a third‐party service provider".

Given that 99% of financial services leaders reported using AI by 2023, firms are now required to conduct rigorous system reviews and ensure human oversight in their automated models. These technological upgrades are running parallel to regulatory shifts, creating a ripple effect on risk controls, leverage policies, and platform requirements.

Managing Leverage Restrictions

Leverage practices vary widely across asset classes, and firms are revising their policies to comply with updated regulations while managing risk effectively. For forex, futures, and cryptocurrency trading, leverage limits are being tailored to address the unique risks of each market. Cryptocurrencies, in particular, with their high volatility and shifting regulatory landscape, have prompted firms to adopt more conservative leverage policies. To further safeguard operations, many firms are enforcing standardized internal controls, such as daily drawdown limits of 5% and total drawdown caps of 10%. These measures aim to promote more sustainable trading behaviors.

Platform-Specific Regulations

Regulatory attention has also turned to trading platforms and data reporting standards. For US-based traders, platform compliance is now a critical issue. As enforcement against non-compliant platforms intensifies, firms are reassessing their technology choices, favoring systems that emphasize transparency and align with US regulatory expectations.

The tightening regulatory environment has already led to the closure of an estimated 80 to 100 prop firms between 2023 and 2024. In response, some firms are pivoting their strategies. For instance, one firm secured a $250 million credit facility from Czech banks, led by UniCredit, in late 2025. This move enabled the acquisition of a regulated brokerage and allowed the firm to offer a widely used trading platform to US traders through its partner's compliant infrastructure.

Compliance now extends into trade surveillance and reporting as well. Firms must transition to the FIXML data submission standard by June 3, 2026, replacing the outdated 80-character format. This upgrade is designed to improve data quality and streamline automated compliance processes.

Trader Support and Development

The prop trading industry is shifting gears toward a model focused on retaining traders for the long haul. Rather than relying on revenue from failed evaluations, firms are now creating integrated systems that combine access to capital with structured education, advanced analytics tools, and community engagement. This approach is setting the stage for better educational resources and stronger community support.

Educational Resources

Prop firms are stepping up their game by introducing AI-powered analytics and institutional-grade tools to help traders grow faster. Modern dashboards now track behavioral metrics, such as execution quality, adherence to rules, and emotional discipline. These tools provide objective feedback on common pitfalls like revenge trading or overextending position sizes. Automated trade review systems also play a big role, offering personalized improvement plans based on each trader's unique performance data.

A standout example is Axcera's DeepCharts™, launched in January 2026. This tool gives over 10,000 traders access to institutional-level order flow analysis - something previously exclusive to professional trading desks. To ensure real-time, high-quality data analysis, Axcera partnered with firms offering low-latency infrastructure. Similarly, platforms like cTrader are integrating AI-powered market analysis tools, such as Bridgewise and Acuity, to enhance trading decisions.

For Traders also provides a robust educational library featuring over 12 video courses on topics like technical analysis, risk management, and trading psychology. Complemented by e-books, these resources serve as handy references to help traders tackle both the technical and psychological challenges of achieving consistent profitability.

While these advanced tools and resources refine technical skills, community engagement adds a layer of practical learning through shared experiences.

Community and Mentorship Programs

Trading can be isolating, and firms are addressing this by building active community platforms. Discord and Telegram groups have become popular spaces where traders exchange strategies, compare performance through leaderboards, and share insights.

For Traders, for instance, fosters a strong sense of community through its active Discord server, where members discuss market trends and connect with peers. The platform also organizes in-person events and trading tournaments, creating opportunities for networking and support. With about 94% of traders failing to pass their initial challenge phases, these community-driven initiatives are becoming essential. They not only help traders stay disciplined but also equip them with the skills needed to succeed in the long run.

Conclusion

The prop trading industry is evolving from its early, unregulated days into a more structured and technology-driven field. Trends like AI-powered analytics, multi-asset trading, tighter regulations, and enhanced trader support systems are redefining what it takes to succeed as a prop trader in 2026.

Technology has become the key differentiator. Firms are heavily investing in tools like ultra-low latency execution, real-time risk management systems, and automated evaluation platforms capable of handling thousands of traders simultaneously. Traders who can navigate institutional-grade platforms and interpret AI-driven insights will have a noticeable edge over those who can't.

The business model is also shifting. Subscription-based evaluations, instant funding options, and performance scaling are replacing traditional one-time challenge fees. These changes aim to improve trader retention and distribute risk more effectively. Given these shifts, selecting firms with proven payout records and transparent fee structures is critical. Traders should plan for multiple evaluation attempts and consider diversifying across 2-5 reputable firms to mitigate risk.

"The firms that will flourish are those that treat prop trading as a long-term, professional enterprise, supported by solid technology and risk management, rather than as a get-rich-quick trend." - Axcera

As discussed earlier, long-term success hinges on prioritizing professional growth over short-term gains. Firms that invest in trader education and community-building programs will help foster sustained success. Traders who focus on disciplined risk management, leverage educational resources, and actively participate in community initiatives can transform prop trading into a viable career. The 7% of traders who achieve payouts are those who approach prop trading with a professional mindset rather than viewing it as a quick gamble.

FAQs

How is artificial intelligence changing risk management in proprietary trading?

Artificial intelligence is transforming how proprietary trading firms manage risk, offering a level of precision and speed that's hard to achieve with traditional methods. With AI-powered tools, firms can analyze massive volumes of trading data in real time, spotting risks and irregularities almost instantly. This not only cuts down on human error but also ensures that risk management rules are applied consistently. Plus, it allows firms to respond quickly to shifting market dynamics.

Another major advantage of AI in risk management is its ability to perform advanced scenario analysis and stress testing. These capabilities help traders and firms identify potential vulnerabilities before they turn into bigger problems. AI also makes it easier for firms to scale their operations, manage teams across multiple time zones, and maintain control during periods of high market volatility. By embedding AI into trading platforms, firms can access real-time insights that drive quicker, more informed decisions - ultimately leading to greater market stability and fewer losses.

What are the advantages of performance-based scaling in proprietary trading firms?

Performance-based scaling brings a host of advantages for both traders and proprietary trading firms. By linking funding and trading capacity directly to a trader's results, this model encourages traders to prioritize consistent profitability and aim for long-term success. The better a trader performs, the more capital and trading opportunities they gain access to - offering a clear incentive to focus on sustainable growth strategies.

For firms, this approach strengthens relationships with traders, reducing turnover and fostering long-term collaboration. It also promotes better trader development and enhances risk management practices, leading to more stable revenue streams. With advancements in technology, such as AI and analytics, firms can now evaluate performance with greater precision, ensuring fairness and efficiency in scaling decisions.

In essence, performance-based scaling creates an environment where skill and consistency are rewarded, benefiting both traders and the firms that support them.

How are new regulations shaping the future of prop trading?

New rules are shaking up the prop trading industry, bringing tighter oversight and tougher compliance standards. In the past, proprietary trading firms often operated with fewer regulatory hurdles. However, agencies like the SEC and CFTC are now zeroing in on key areas like transparency, capital requirements, and trader verification.

The goal is to create a more organized and accountable trading environment. Firms are being pushed to step up their game in areas such as risk management, liquidity controls, and adherence to anti-money laundering and cybersecurity protocols. As these regulations take hold, both firms and individual traders will need to adjust their strategies to remain compliant while staying competitive in this changing landscape.

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