Industry, legal and operations
Broker
A firm that executes trades on a client's behalf and holds client funds to do so. It is a different business from a prop firm, with different obligations and a different relationship to the client.
GFN’s figure
GFN is not a broker, financial institution or investment provider. It does not accept customer investment deposits and does not provide financial, investment, legal or tax advice.
In detail
Broker,explained
A broker takes deposits, executes orders and is typically authorised in the jurisdictions it serves. A prop firm assesses traders and pays out against performance, and takes no deposit at all.
Confusing the two leads to the wrong questions. A prop firm is not asked where client money is segregated, because there is no client money to segregate.
Related
Terms thatcome with it
Most rules only make sense next to the ones they interact with. These are the entries this one depends on.
Prop firm
A company that assesses traders and pays them a share of the results they produce, rather than a broker that executes orders for clients. Most modern retail firms run the assessment on simulated accounts.
A-book
A brokerage model where client orders are passed through to external liquidity providers rather than held internally. The broker earns from spread and commission and takes no position against the client, so its revenue follows volume.
B-book
A brokerage model where client orders are held internally rather than passed to a market, so the broker takes the other side of them. Client losses become broker revenue, which is the structural objection to it.
Liquidity provider
An institution that streams tradeable prices to brokers and venues - typically a bank or a specialist trading firm. Their aggregated quotes are what a retail price is ultimately built from.
Live account
A brokerage account holding a trader's own money, where orders reach a market and losses are the trader's own. It is the thing a simulated prop account is deliberately not.
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