What is a prop firm,and what are you buying?

Proprietary trading is trading a firm does with its own capital, for its own profit, rather than on behalf of clients. The term is precise enough that US regulators wrote rules around it. When the Volcker Rule was finalized, the five agencies involved summarized it as generally prohibiting banks from:

“engaging in short-term proprietary trading of securities, derivatives, commodity futures and options on these instruments for their own account.”^[1]

The Federal Reserve summarizes it the same way: the rule "generally prohibits banking entities from engaging in proprietary trading or investing in or sponsoring hedge funds or private equity funds"^[2]. The phrase that matters is "for their own account". A traditional prop desk risks the firm's money, and the people trading it work for the firm.

The firms that advertise to individual traders borrowed the name but not the structure. You are not hired, and you are not handed capital. You buy an evaluation, trade a simulated account under published rules, and are paid a share of the simulated profit if you pass and stay within those rules.

1. You pick a program and an account size, and pay a one-time fee. The size is a simulated balance, not a deposit.
2. You trade to a set of risk rules. Typically a profit target, a daily loss limit and a maximum drawdown, sometimes with a minimum number of trading days or a consistency rule.
3. Break a hard rule and the account ends. The fee is not returned.
4. Pass, and the account becomes a simulated funded account. The same kind of rules keep applying.
5. Request payouts on a schedule. You are paid your share of eligible simulated profit, after identity checks.

At a simulated-evaluation firm, the trading is simulated and the payouts are real. That sentence is the whole model, and its second half is why it is worth understanding the first. Here is how GFN puts it in its own signed wording:

“All Evaluation and Funded Accounts are simulated or virtual accounts; no customer trades are executed by GFN in live financial markets, and references to “funded” or “funding” refer to simulated or virtual funding.”^[4]

“Eligible traders may receive real monetary payouts based on qualifying simulated performance, subject to the applicable program rules, profit split, KYC/compliance checks and Terms & Conditions.”^[4]

So on a GFN account, your fee is not invested, no order you place reaches a live market, and a loss on the account costs you nothing beyond the fee. A profit on the account is paid to you as real money, at the share your program carries, once the payout rules are met.

Do not assume so. A firm that sells simulated evaluations and holds no client deposits is not doing what a broker does, and the protections that come with a regulated broker do not come with it. Some firms say they are regulated; if one does, check the claim on the regulator's own register rather than the firm's website.

“GFN is not a broker, financial institution or investment provider, does not accept customer investment deposits and does not provide financial, investment, legal or tax advice.”^[4]

GFN is a trading name of Bradbury Capital Ltd, company number 17102934, and the company record is public on Companies House^[3]. A company registration tells you who you are dealing with. It is not a financial-services license, and GFN does not claim one.

• Who is the company? A registered name and number you can look up, not just a brand.
• Are the rules published before you pay? Every limit, in full, including what counts as a breach.
• What does "funded" mean in their terms? Simulated or live, and who is on the other side of your trades.
• What are the payout conditions? Schedule, share, caps, buffers and identity checks - not just the headline percentage.
• Is there a consistency rule or minimum trading days? They change how you have to trade more than the target does.
• What happens when you fail? Whether there is a retake, and on what terms.
• What do traders say where the firm cannot edit it? Independent review sites and forums, including the negative reviews.

A retail prop firm sells you an attempt, not capital. The fee buys the chance to show a strategy can stay inside a fixed set of risk limits, and it is gone if the strategy cannot. Nobody - including GFN - can tell you that you will reach a payout. If that trade-off is acceptable, pick the program whose rules match how you already trade: the 2 Step is the cheapest way in, the 1 Step has one target and no consistency rule, and Instant skips the evaluation for a lower share and a capped withdrawal.