By Shireen T. Singh
April 28th, 2025
BURLINGTON, ON
The world of fintech has gained a lot of attention since 2018, and for good reason. Simply looking at the numbers, you can just tell that the industry is growing rapidly. At the end of 2023, the F-Prime Fintech Index, which tracks the industry’s growth, estimated the market cap of the industry to be $573 billion. And that’s double what it was in 2019!
Trade with a firm’s money for profit from the comfort of their home.
Today, financial services are becoming more efficient and user-friendly than ever, making fintech a mainstay in today’s economic climate. One area where fintech’s relevance is growing significantly is proprietary trading. So, let’s examine how fintech is transforming prop trading and what its future is shaping up to be.
Understanding Prop Trading
When a financial institution, like a bank or hedge fund, trades with its own money in the forex market, stock market, or other financial markets, that’s called proprietary trading. These financial companies typically make trades on behalf of their clients and earn a commission, but prop trading is a little different. Instead of using a client’s money to invest, they use their own capital, which means they can take on more risk and have a shot at higher rewards.
Thanks to advancements in fintech, this form of trading has become more accessible and advanced, opening up new opportunities to companies and traders globally. CFD brokers and prop trading firms now provide retail traders with access to institutional-grade trading environments, allowing them to leverage cutting-edge trading tools. For example, platforms like OANDA now allow traders (with no capital) to trade with a firm’s money for profit from the comfort of their home.
It is also important to note that financial corporations involved in prop trading do this for one major reason, and that is to make more profit. In order to keep things fair and focused, they have special sections of the company dedicated to these kinds of trades — referred to as the prop trading desk. This desk operates separately from client-focused areas and sometimes even acts as “market makers,” meaning they step in to buy or sell large amounts of security when there isn’t enough movement in the market. This keeps things flowing and adds increased stability to the market, even when things get rocky.
Evolution of Prop Trading
In the 1980s, before the internet, prop trading started as a way for retail traders who weren’t wealthy investors or big institutions to get a chance to join in on the stock market action. This was possible when financial corporations created “pool accounts” that allowed these smaller traders to access real-time data and trading tools they couldn’t get on their own.
These people were skilled traders who worked directly from these firms’ offices to help grow the company’s capital.
These people were skilled traders who worked directly from these firms’ offices to help grow the company’s capital. They then earned part of the profits they garnered for these financial institutions. This is the foundational setup that structures today’s prop trading model, where firms still partner with individual traders.
Thanks to the internet, the world of prop trading has become so advanced that it is somewhat unrecognizable. However, the concept remains the same: traders pay a fee to be evaluated, and if they pass, they get access to the firm’s capital, sharing any profits that they make. Technological advancements have made prop trading easily accessible to every trader willing to fulfill requirements stipulated by prop trading firms.
Currently, well over 100 online prop trading firms offer evaluation programs for anyone who wants to try trading. While most traders might not make it past the evaluation, the few who succeed stand to earn significantly by trading with more funds than they would have had on their own.
Three Key Fintech Innovations Transforming Prop Trading
The trading methods and tools used to carry out innovative and competitive trades have changed significantly owing to the advancement in the fintech industry. With the advantage of fintech, prop trading has become faster, smarter, and more adaptable to market changes. Here are three key fintech innovations that are transforming the world of prop trading that are available through these solutions.
High-Frequency Trading (HFT)
Today, it is much easier to use high-frequency trading in prop trading. HFT is a technological advancement that allows thousands of trades to be carried out in fractions of a second. When used together with algorithmic trading, it can boost trade volume and speed, helping traders react instantly to market changes and increase profits. This advancement has given traders and firms an upper hand in the markets but also poses a risk of increased market volatility, especially when trades are executed at high speeds in sensitive conditions.
