Prop Trading in the Netherlands – What You Should Know

The Netherlands is one of the financial centers of the European Union and many companies engaged in securities trading are based there.

Due to the rapid rise in popularity of prop trading around the world, the Netherlands has emerged as an attractive destination for such firms to enter a developed market and give traders the opportunity to trade forex and other securities using funded accounts.

To better understand how prop trading works in the Netherlands and what differences could exist when compared to other countries, we must overview the general mechanics of prop trading, the regulatory climate in the Netherlands and how traders can access the funding challenges provided by these prop firms.

How Prop Trading Works

Proprietary trading is not a new concept on the market and has been around for over a decade. The concept is quite simple to grasp – Prop firms have capital, which they use to fund traders who can prove their skills by completing a funding challenge, which allows them to access a specified amount of capital, which they will use to trade forex and other securities to generate profits. The prop firms charge account fees based on their face value and also take a minority cut from the profits generated by the trader.

Due to the fact that prop firms do not engage in securities dealing, they are not subject to much regulatory scrutiny, which also makes it easier for the firms to offer their services to a global audience of traders.

Prop trading rules and restrictions

While prop trading may seem rather simple at first, there is one important consideration that should not be overlooked – rules.

Each prop trading firm has a set of rules and limitations in place and every trader is obligated to comply with these rules in order to pass a funding challenge or to maintain an already funded account.

Some notable rules that apply to prop trading accounts include the following:

• Profit target – how much profit a trader must generate over the course of the evaluation program in order to successfully pass the challenge
• Drawdown limits – the daily and maximum possible realized loss allowed for traders on a particular account type
• Trading days – many prop firms enforce maximum and minimum trading day requirements, which means that the trader must complete at least one transaction during the day

These rules are essential features of a prop trading challenge, as they determine which clients are able to get funded and who has to pay the challenge fee again and start over.

Prop trading regulations

It is worth noting that the regulatory framework present in the Netherlands focuses more on the business side of prop firms, as opposed to the process of prop trading, as it is not related to any brokerage services or dealing in securities.

In accordance with the MiFID II, prop firms are required to comply with reporting and transparency guidelines, as well as investor protection protocols concerning the shareholders and partners of the prop firm, as opposed to the clients that sign up at a prop firm.

Prop trading is generally not subject to much regulation, which is why traders based in the Netherlands can access a wide range of firms with different terms and features to pick the best possible ones for their trading objectives.

Forex Regulations in the Netherlands

The Netherlands is known for its robust financial regulatory ecosystem, which oversees the trading of forex, stocks, bonds, crypto and commodities.

The primary regulatory body tasked with overseeing the financial markets in the Netherlands is the Authority for the Financial Markets, or AFM.

The AFM obligates forex brokers to provide information regarding their corporate structure, directors, shareholders, financial performance, etc.

In addition to the AFM, which is a Dutch regulatory body, the European Securities and Market Authority, or ESMA, also regulated forex brokers all across the EU.

When obtaining a brokerage license in the Netherlands, the minimum required paid-in capital is equal to EUR 730,000 for brokers that keep client funds on their accounts.

Furthermore, brokers are required to keep client funds in segregated accounts, while the maximum allowable leverage is capped at 30:1.

These are only a handful of rules governing forex brokerage firms in the Netherlands, as there are sets of regulations overseeing the corporate structures and investor rights of the firms as well.

Payment Channels for Prop Traders in the Netherlands

Traders who are interested in signing up for a funding challenge at a prop firm naturally would like to know more about the available payment methods they can use to pay the account fees charged by the firm.

Luckily, traders in the Netherlands have access to a wide range of online wallets, commercial banks and online payment channels.

Bank transfers and credit cards

Using bank transfers is the most common method of payment at prop firms. Visa and Mastercard credit cards issued by the likes of ING, ABN Amro, De Volksbank and others are accepted by most prop firms.

Online wallets

Other financial payment channels, such as online wallets and payment companies like Revolut and Adyen, are also accepted by prop trading firms.

Other notable payment companies accepted by prop firms include PayPal, Bunq, Mollie, and others. You can find out more about the specific payment channels supported by a particular prop firm upon signing up with them and choosing the funding challenge you would like to purchase.

Crypto

Numerous prop trading firms also accept cryptocurrencies as valid methods to pay for a funding challenge. Typically, Bitcoin is the go-to cryptocurrency, but some also accept Ethereum and USDT as well.

All that is required to pay for a funding challenge using crypto is a valid crypto wallet and sufficient funds available on the balance. As for the specific chains, the prop firm will provide the list of supported chains upon choosing crypto as the funding source.

Assets Available at Prop Trading Firms in the Netherlands

Each prop firm available to Dutch traders offers a mix of different asset classes to their clients. This includes forex pairs, indices, stocks, crypto and commodities, which traders can use to construct trading strategies and beat funding challenges.

Currency pairs

Forex trading is the most popular among prop traders, as most prop firms tend to focus on currency trading, due to exceptionally high degree of liquidity.

For major pairs like the EUR/USD and USD/JPY, to minors and exotics, most prop firms offer between 50 and 100 pairs for trading.

The leverage for these pairs can reach as high as 1:100, but the ESMA regulations active in the Netherlands limit the available leverage to 30:1.

Indices

Major equity indices, such as the S&P 500, DAX 40 and others, are also available at prop trading firms. However, it is worth noting that the number of available indices for trading is generally quite limited and most prop firms will offer up to 10 instruments in this asset class.

Trading indices also qualifies for leverage, which makes it easier for traders to alternate between forex and indices when market conditions are rapidly changing.

Crypto

Cryptocurrencies are some of the most popular assets traded at prop firms. Due to their inherently volatile nature, many traders use Bitcoin and Ethereum as tools to meet their profit targets more easily during evaluation challenges.

In most cases, prop firms will offer only a handful of cryptocurrencies for trading. However, the volatility of crypto means that the potential upside, as well as downside, are considerably larger than forex.

Commodities

Most prop firms will offer two types of commodities for trading – energies and metals.

Oil and gas are two of the most popular commodities among prop firms, while gold and silver also provide ample opportunities for traders to diversify away from currencies.

Similarly to crypto and indices, the number of commodities available for trading is also relatively limited. However, this is unlikely to be an issue for traders, as energies and metals, two of the most demanded asset classes, are both available.

Stocks

Stocks are the rarest asset class to see at a prop firm. Due to the sheer number of stocks available on exchanges around the world, most prop firms that do offer stocks, tend to focus on some of the most popular and highly liquid stocks, such as Apple, Tesla , Microsoft, Coca-Cola, etc.

Some prop trading firms only offer funded stock trading accounts and skip forex altogether. Although this is rare, such prop firms may have over 100 different stocks on offer to their clients.

FAQ on Prop Trading in the Netherlands

Is prop trading legal in the Netherlands?

Yes. Prop trading is legal in the Netherlands and traders interested in the practice can access a wide range of notable prop firms from all over the world. Prop firms do not deal in securities, therefore, they are subject to considerably less licensing and regulatory requirements than brokerage firms.

How is prop trading regulated in the Netherlands?

Prop trading is subject to little regulation in the Netherlands, as well as the rest of the world. Prop firms from all over the world can offer their services to traders based in the Netherlands, as local regulations primarily target the corporate structure and investor relations side of the business, as opposed to the client-facing side, as prop firms do not offer brokerage services.

What can I trade with Dutch prop trading firms?

Prop trading firms that are available to Dutch traders offer a wide range of instruments – currency pairs, indices, commodities, and crypto. In rare cases, some prop firms also offer stock trading to their clients as well.

Traders can pay for funded accounts and upon passing the evaluation phases, they can choose which instruments to buy and sell and how much leverage they can use while trading.