The rapid rise in popularity of proprietary trading has not remained unnoticed by traders globally. Sweden, which is a country that is known for its robust financial system and highly regarded regulatory framework, is an interesting market for prop trading firms to offer their services via funding challenges that allow traders to drastically boost their buying power and gain access to funds that can help them make a fortune in trading.
Is prop trading regulated in Sweden and how easy is it to open an account with an international prop firm without leaving Sweden? – While the country can be quite strict with its regulations concerning brokerage firms and other financial institutions, prop trading is considerably different in this regard. But first, let us overview what prop trading is and why you might be interested in giving it a try.
Prop trading is a different approach to trading that involves the trader and the prop firm. The prop firm offers funding to experienced traders that can prove their pedigree by beating the funding challenge provided by the firm. The challenge typically limits how much the trader can lose, how much profit they need to generate and how consistently they have to trade in order to successfully pass the gauntlet.
Once the trader has paid the challenge fee and beaten the evaluation stage, they can gain access to the funds promised by the account and continue trading in accordance with the rules set by the firm. The firm takes a small cut from the profits generated by their traders and recoups the value of the account over time.
For example, a trader may pay $500 in order to access a $100,000 account, which is only a fraction of the face value of the account and many traders will consider this to be a lucrative deal.
The difficulty of the funding challenge greatly depends on the specific prop firm and the value of the account a trader is targeting. For example, a $500,000 evaluation would cost significantly more than the $10,000 one and is also likely to have stricter terms and limits for the trader.
These limits exist in order to control the flow of traders that actually get funded, without jeopardizing the financial stability of the prop firm itself.
Since prop firms do not hold client funds on their accounts as deposits and do not facilitate brokerage services, the regulations that govern these firms can be rather lax, as we will see in the coming section as well.
The Swedish Financial Supervisory Authority, known in Swedish as Finansinspektionen, or FI, is the primary regulatory body that oversees the licensing and regulation of brokerage firms.
The FI enforces controls on the minimum capital required to register as a licensed broker, as well as a wide range of client and investor protection measures.
As part of the MiFID II, every broker-dealer must adhere to the principles set forth by the directive that is active across all of the EU.
Regular reporting obligations and financial transparency are key requirements of the MiFID II directive governing forex, commodities, derivatives and equities brokerage firms.
On the other hand, prop firms are not subject to such stringent rules and regulations, as prop firms do not engage in the brokerage of the instruments they offer. Rather, prop firms partner with existing licensed brokerage firms to give their clients access to the trading platforms and the instruments that are available to their partner broker.
As we have already discussed, prop firms charge traders for their funding challenges and traders can pay the fee using different payment methods.
While credit cards issued by commercial banks are the most popular method of payment, traders can also do so using cryptocurrency, or via an online payment software.
It is also worth noting that only a handful of prop firms support the Swedish krona (SEK) as a valid account currency, as most prop firms support USD and EUR for transactions and trading.
Any Visa and Mastercard credit card issued by a Swedish bank is eligible to pay the funding challenge fee.
The fees charged by a prop firm do not include any additional hidden surcharges and other fees. A vast majority of prop firms accept EUR and USD as payment currencies.
Paying with Bitcoin and Ethereum is also quite common among prop trading firms. In fact, it is one of the fastest and most secure methods of payment.
Some prop firms will have support for a number of different coins. Therefore, as long as you have a valid crypto wallet with sufficient funds on your deposit, you can pay the account fees using crypto at most prop firms available in Sweden.
Klarna, which is a Swedish online payment software, is arguably the most popular option among traders based in the EU. alternatively, Revolut, PayPal and other payment platforms are typically also supported by prop trading firms.
Similarly to credit card payments, there are no additional fees and charges, other than the price indicated on the official website of the prop firm of your choice.
While prop firms headquartered in Sweden are very rare due to tax purposes, any international prop firm that has access to the Swedish market is likely to offer different asset classes to its client base.
From forex and commodities to crypto and sometimes, stocks, prop firms usually do not offer the most extensive lineup of instruments, but they do provide a decent variety of them to allow traders to alternate between trading strategies and make adjustments when their initial strategy is less successful.
Currency pairs, from majors to minors and exotics, are very popular among prop traders and the focus of numerous prop firms available on the market.
Currency pairs involving the Swedish krona, or SEK, are also available at many prop trading firms, which should be of particular interest to traders based in Sweden.
The spreads on currency pairs are generally quite tight – allowing traders to open and close trades at very short time frames.
Metals and energies are two types of commodities that are very popular among prop trading firms. In particular, gold, oil and gas attract a considerable amount of traders who sign up at prop firms.
Gold is an especially common choice among traders, as it gives them the alternative to hedge against other markets. For example, when the stock market is underperforming, traders may open leveraged long positions on XAU/USD, etc.
Trading BTC, ETH and other major cryptocurrencies is also quite popular among the prop trading crowd. Due to rapid upswings and downfall, crypto is a riskier, but more lucrative instrument, particularly when dealing with a prop trading challenge.
Traders can diversify their funded account among more stable and volatile instruments to strike a balance, while also satisfying the consistent trading rules that are commonplace.
Major stock indices are very attractive for prop traders that otherwise do not have any exposure to the stock market. In fact, prop firms that do not offer stock trading tend to have a larger selection of indices on their platforms to make up for this and give traders opportunities to switch their strategies from one asset class to another.
The Dow Jones Industrial Average, the S&P 500, the Dax-40 and the Nasdaq-100 are among the most popular indices traded on prop firms, with the FTSE-250 and Nikkei-225 also being common offerings.
While prop firms that offer stock trading are quite rare, some do still offer a few dozen stocks for their clients to pick. Usually, prop firms will focus on the stocks with the highest interest among traders, which may include the likes of: Tesla, Apple, Meta, Amazon, and other constituents of the S&P 500 index.
Stocks provide a much needed alternative for prop traders to balance their strategies in accordance with the requirements and limitations of the prop firm they are trading with.
Yes. Prop trading is legal in Sweden and subject to limited regulations. Prop firms do not provide brokerage services and do not hold client funds on their accounts, which is why they are exempt from the general financial regulations that oversee brokerage firms in Sweden.
Proprietary firms in Sweden offer a range of different instruments for traders to buy and sell, beat trading challenges and generate profits consistently.
Currency pairs, commodities, stocks, crypto and indices are some of the asset classes available to traders who sign up at a prop firm. However, the offerings can differ considerably among prop trading firms.
Yes. You could make money using prop trading in Sweden, While your success depends on your ability to beat the market and choose the right positions, prop trading firms offer funded accounts that greatly boost your buying power and allow you to boost your profits in the process as well.
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