Prop trading has emerged as an exciting new market for forex and commodities traders worldwide. With numerous firms offering their services to a global audience of traders, choosing the right one can be challenging.
However, before you switch to picking the one that is right for you, it is important to understand the overall prop trading landscape of your jurisdiction of residence to see how and if prop trading is regulated there and what to expect from the local market overall.
Italy upholds very little regulation when it comes to prop trading firms, which is why it is a lucrative market for international firms to offer their services to.
The premise behind prop trading is relatively simple to understand for even the least experienced traders:
Funded accounts come in exchange for a fee, which is typically fully refundable upon successfully completing the funding challenge.
While prop trading is generally not subject to any regulation, this does not mean that there are no rules or restrictions when it comes to what traders can do after signing up for a funding challenge.
Typically, since the terms and prices offered by prop firms are generally quite lucrative, only the traders that are able to beat funding challenges can get funded and potentially withdraw profits from their accounts.
The most common types of rules that are part of a funding challenge are the following:
While these are the core rules enforced by most prop trading firms, several other rules and restrictions may also exist at other firms.
When comparing prop trading rules to general forex brokerage regulations, the difference is quite stark. The CONSOB, which is the primary regulatory body overseeing brokerage firms and securities dealers in Italy, enforces strict rules and regulations in harmonization with the ESMA rules that govern financial institutions across the European Union.
Furthermore, the MiFID II guidelines enforce additional rules regarding the financial transparency of market operators and securities dealers in order to ensure the security of investors against malpractice from brokerage firms and other financial institutions.
From minimum capital requirements, transparency of shareholders and directors, to KYC and AML procedures, the CONSOB, in compliance with the ESMA, ensures the transparency of financial players on the brokerage market in Italy, which includes every forex, stock and commodities broker operating in the country.
On the other hand, prop trading firms are not subject to any of the aforementioned rules and regulations, as they do not deal in securities and do not hold clients’ funds on their accounts.
For this reason, setting up a proprietary trading firm and accessing lucrative markets, such as Italy and the rest of the EU, is relatively straightforward for prop firms based overseas.
As we have already mentioned, the challenges offered by prop firms are divided into different funding tiers, based on the face value of the account. For instance, a prop firm may offer accounts with buying powers of EUR 10,000, 25,000, 50,000 and 100,000 – all at different price points.
In many cases, the fees associated with these accounts are fully refunded once or if the trader successfully passes the evaluation stage.
When it comes to paying the fee for the funding challenge in Italy, users have several options they can choose from.
The traditional route of paying using your bank card is accepted by virtually every prop trading firm on the market. Clients in Italy who own a Visa or Mastercard credit card issued by an Italian bank, such as Intesa Sanpaolo, UniCredit, CDP, or others, can easily make the payment using their credit cards.
Typically, there are no commission fees charged on the payment, other than any that are charged by the bank of your choice.
If you have an account with PayPal, Revolut, Wise, Paysafe, or other online payment app, chances are that your prop firm will accept your payment through these channels as well.
However, always make sure to check which specific, if any, payment apps are accepted by your prop firm in order to avoid any complications or misunderstandings.
The transactions made using these apps typically do not take very long and you can start trading once you have received payment confirmation from your prop trading firm.
Crypto trading is quite popular among prop trading clients and many prop firms also accept crypto as a payment method for their funding challenges.
While the most frequently used cryptocurrencies are Bitcoin and Ethereum, many firms also accept the likes of: Tether, Litecoin, XRP, etc.
The payment process is identical to any crypto transaction and it is crucial to make sure that the payment chain and coin are matching to avoid losing your funds.
The specific instruments available to you for trading is perhaps the most important part of any trading experience and proprietary trading is no different in this regard.
While the specific list of offerings may vary considerably between different prop firms, there are some baseline instruments that are likely to be available at most such firms, thanks to their importance and high degree of liquidity.
The spreads and other fees charged on trades can also vary and should be available on the official website of the prop firm of your choice.
Forex trading is by far the most popular activity among prop traders, with major pairs being especially frequently traded. Many prop firms offer a zero spread on EUR/USD, which is the most liquid instrument available at any prop firm you can come across.
Typically, most prop trading firms will offer a mix of major, minor and exotic pairs to give traders a balanced selection of instruments to trade.
Some prop firms give traders access to MetaTrader 4 or 5, while others use third-party brokerage firms to gain access to their trading software.
Alongside forex, crypto trading is incredibly popular at proprietary firms. Trading Bitcoin and Ethereum allows prop clients to gain access to volatile instruments, which can be helpful when it comes to beating the profit target of a funding challenge.
However, this volatility can be a double edged sword, especially considering the considerably lower degree of leverage available to crypto traders.
In rare cases, prop trading firms may offer certain major stocks to their clients as well. For example, traders who sign up for these prop firms, may have access to stock like Apple, Tesla, Amazon, Microsoft, etc.
Typically, prop firms that do offer stocks to their traders focus on major stocks with a high degree of liquidity and ensure ease of access. For this reason, traders who expect more obscure stocks at prop trading firms may be disappointed by the seemingly limited selection of stocks on display.
Commodity CFD-s such as metals and energies, are particularly popular at prop trading firms. For example, Crude and Brent oil, natural gas, gold and silver are some of the most high-demand securities traded by prop clients.
These instruments give traders access to a higher degree of volatility, which can be helpful in reducing the time required to reach the profit target set by a prop firm, all else being equal.
However, the number of available commodities is usually limited to metals and energies, as opposed to agricultural and other types of commodities.
Major equity indices are also available at prop trading firms. The likes of US500, US30, US100, GER40, UK100 and EU50 are some of the major indices from different stock exchanges traders can use to buy and sell CFD-s on.
These indices are typically more stable in price when compared to crypto and certain forex pairs, which is why many traders tend to include them in their strategies.
Yes. Prop trading is completely legal in Italy and subject to little to no regulatory scrutiny, as prop firms do not deal in securities, or hold clients’ funds on their accounts. For this reason, prop trading firms from all over the world are able to offer their services to traders based in italy.
Yes. You could make a substantial amount of money with prop trading in Italy. However, your personal success largely depends on two factors – market conditions and your ability to formulate a profitable strategy that aligns with the limits set by the prop firm of your choice.
Prop traders based in Italy have access to firms from all over the world – offering different instruments, such as: forex, commodities, stocks, indices and cryptocurrencies.
The offerings of each prop firm may differ considerably, which is important for prospective clients to consider.
Get the most recent news at your inbox
Stay up to date with the financial markets everywhere you go. We won’t spam you.
