The UAE has long been one of the most active financial hubs in the world and the advent of proprietary trading has meant that the country has become an attractive destination for yet another financial industry.
Prop trading firms provide funded accounts to traders all over the world – giving them lucrative opportunities to boost their buying power and improve their profits at a fraction of the cost.
The business-friendly climate of the United Arab Emirates also means that firms from all over the world can offer their services to traders in the country.
Before we discuss the prop trading environment specific to the UAE, it is important to understand what prop trading is and how it differs from trading using personal capital.
Most traders tend to use their own savings to trade and make investments on the market, which is great for those that have a substantial amount of money allocated to trading.
On the other hand, gaining access to cheap capital is also enticing for most traders. This is where prop trading comes into play and delivers a different experience.
Prop trading firms offer funded trading accounts to their prospective clients who need to demonstrate their ability to trade in accordance with the firm’s requirements by completing a funding challenge, or passing the evaluation stage, which involves a certain set of rules that need to be followed in order to qualify for a funded account.
The accounts are offered in exchange for a fee, which is typically equal to a small fraction of the buying power of the account itself, which can be a great deal for most traders.
Once a trader has successfully passed the funding challenge, they can gain access to the funds and start generating profits that they can withdraw periodically.
The rules set by prop firms serve two important functions:
The general rules present at prop trading firms tend to vary, but three are a few common requirements between competing firms, which are:
While other rules may also exist at different prop trading firms, the ones mentioned above tend to be present at a majority of firms available to traders in the UAE, which is why it is important to be mindful of the rules and restrictions when trading during a funding challenge, or using a funded account.
While the UAE is known for its lax regulatory environment and a generally business-friendly attitude, forex and stock brokerage firms that would like to deal in securities with their clients in the country still need to obtain some licensing permits and comply with capital requirements and other regulations upheld by the DFSA.
The primary functions of the Dubai Financial Services Authority, or DFSA, are the following:
The minimum capital requirement of $500,000 is also in place to ensure that brokerages and other financial intermediaries have the required capital to fund continuous operations in the country.
This comes at a stark contrast to the lack of regulations in the prop trading market, which does not require licensing and minimum paid-in capital to operate.
This is due to the fact that prop firms are not securities dealers, nor do they hold client funds on their accounts. This means that the investor protection and fair market measures that apply to brokerage firms are obsolete when it comes to the practice of prop trading.
This also explains the fact that prop firms based overseas can easily access the UAE market and offer their services to traders residing in the country.
Once you have chosen a prop firm and the specific funding challenge you would like to enroll in, it is now time to pay the account fee and start your challenge.
The payment can be done using several different methods, which includes bank transfers, credit card payments, online payments using PayPal and other apps, as well as cryptocurrencies.
Crypto payments are particularly popular in prop trading, as it allows clients to quickly and safely pay for the challenge using Bitcoin, Ethereum, USDT, or other coins.
On the other hand, credit cards issued by most commercial banks operating in the UAE will be accepted by prop firms, with the primary account currencies being USD and EUR in most cases.
Alternatively, online payment apps are another way to safely pay for the funded account using PayPal, Wise, Noon Pay and others.
Before making a payment, make sure that the prop firm accepts the method of payment you are choosing and that all of the information is correct to avoid the risk of losing your funds.
While prop trading is often associated with forex, currency pairs are far from the only asset class tradable at proprietary firms.
A combination of commodities, indices, cryptocurrencies, and sometimes stocks are commonplace.
The spreads and available leverage can vary considerably depending on the asset class, but this can be a welcome tradeoff for traders that would like to diversify and take advantage of favorable setups on other markets.
Most prop trading firms focus their attention on forex trading, as it is the most liquid market in the world and attracts millions of traders to the market every day.
Prop firms in the UAE tend to offer up to 50 or more different pairs to their clients, including the likes of EUR/AED, GBP/AED, etc.
The spreads on forex pairs tend to be tight, especially when it comes to major pairs like the EUR/USD.
When it comes to leverage, most prop firms offer a maximum forex leverage of up to 1:100, which can help traders boost the buying power of their positions and reach profit targets faster.
Commodities also attract a lot of attention from funded traders, with oil and gold being particularly popular.
These instruments give traders the necessary means of diversification, particularly during periods when other asset classes are underperforming.
Most prop trading firms offer a handful of commodity CFD-s to their clients, with a particular focus on metals and energies.
Crude and Brent oil, natural gas, gold and silver are commonly found on the list of instruments offered by prop trading firms.
While spreads on commodities may be higher than currency pairs, they also qualify for an average leverage of 1:50, which can help traders reach their profit targets faster by boosting their buying power.
A wide range of prop firms operating in the UAE also offer cryptocurrency trading to their clients. The inherent volatility of the likes of Bitcoin, Ethereum, Litecoin and other cryptocurrencies, means that traders can benefit from rapid upswings to reach the profit target more easily.
However, it is also worth noting that the overall number of available cryptocurrencies tends to be relatively limited, with a focus on coins with high market capitalization.
The spread on crypto trading is considerably higher than the rates charged on forex pairs and commodities. This also means that even strategies on short time frames may deliver decent results for prop traders.
Equity indices from major stock exchanges around the world give traders exposure to another asset class, with a lower average volatility than individual stocks.
Traders can choose between stock indices such as: US500, US30, GER40, FRA40, JP225 and other select instruments.
Indices provide a broad exposure to the equity markets of a particular economy, without the risk of individual components, which places indices between forex and crypto in terms of volatility.
In some cases, prop firms may also offer individuals stock reading to their clients. However, it is also worth noting that the selection of stocks is typically limited to a few hundred of the largest and most popular equities from the U.S. market. The likes of Apple, Tesla, Coca-Cola, Microsoft and other industry-leading companies are usually represented, while small-cap and most mid-cap stocks may be missing.
Overall, stock trading at prop firms is quite rare and most companies available on the UAE market are unlikely to offer individual stocks.
Yes. Prop trading is legal in the UAE and subject to very little regulation, due to the fact that prop trading firms do not hold client funds on their accounts and do not act as securities dealers.
For this reason, UAE traders can easily access a wide range of international prop firms.
While you could make money using prop trading in the UAE, the overall profitability depends on your ability to formulate trading strategies that are aligned with the rules and limitations of the prop firm of your choice, while meeting the profit target in the process.
Prop trading firms in the UAE offer a wide range of different instruments, which may include: currency pairs, commodities, stocks, indices and cryptocurrencies.
Most prop firms in the UAE will offer a minimum of 100 individual instruments to their clients.
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