Prop Trading

How to Stay Compliant as a Prop Trader: The Complete Guide

• Mockapital
• January 27, 2025

Prop trading is an extremely rewarding profession. it is also a highly regulated profession with multiple rules and guidelines to work in. Obeying these rules is not only about compliance, but also about professionalism, and contributing towards a transparent environment. 

The most important steps that would help a prop trader be compliant are discussed below: 

1. Understand and Follow Program Rules

Every proprietary trading program has a set of rules designed to ensure fairness and maintain risk management. These can include profit targets, drawdown limits, and trading restrictions.

Key Tips

• Review Guidelines: Before you start trading, take the time to read and understand all program requirements. Missing critical details could lead to unintentional violations.
• Track Your Activity: Regularly monitor your trading to ensure you’re following all benchmarks and restrictions.
• Ask Questions: If a rule is not clear, clarify it to avoid taking unnecessary risks.

Following these tips not only keeps you in good standing but also shows your dependability as a trader.

2. Trade Under One Trading Profile

Transparency and fairness are core principles of proprietary trading. Typically, having more than one account under the same program is strictly not allowed and can lead to suspension or disqualification.

What You Should Do

• Stick to one profile for all your trading activities.
• Avoid creating additional accounts to bypass restrictions or gain an unfair advantage.

By adhering to this principle, you uphold the integrity of your trading environment.

3. Protect Your Account Security

Your trading account is the foundation of your success. Ensuring its security is your responsibility. Account breaches or misuse can lead to financial losses and reputational harm.

Best Practices

• Use Strong Passwords: The passwords should be unique and strong enough to be difficult to guess
• Don't Share Credentials: Never share login details with associates, no matter how close
• Enable Two-Factor Authentication: If such an option exists on your trading platform, consider activating it to improve security

Taking such proactive steps protects your account and ensures constant trading.

4. Complete Identity Verification

Identity verification, often called Know-Your-Customer (KYC), is a common procedure in the prop trading environment. This will make sure that a person is keeping to the legal requirements and is free from illegal activities.

Basics:

• Make sure your documents are correct and up to date.
• Send your verification early to avoid having your account approval or payout delayed.
• Verify that your profile information is still current.

Successful KYC completion often serves as a precondition for unlocking features like payout eligibility.

5. No Conflicts of Interest

To maintain a fair-trading environment, the commissions should not engage in anything that can create a conflict of interest. These include other affiliations with other trading firms or activities that compromise impartiality.

How to Avoid Conflicts of Interest

• Disclosure of any potential conflicts. These include having a relationship with other trading programs or firms.
• Avoid activities that may raise questions about your impartiality or integrity.

By avoiding conflicts, you ensure that your trading actions are above board.

6. Follow Payment Policies

Compliance is not only limited to trading but also extends to payment handling. Most programs have strict rules on how payments should be made and received.

Recommendations

•  Use only payment methods registered in your name to avoid discrepancies.
• Make sure the payment information is correct to avoid any problems during the transaction.
• Avoid using third-party payments.

7. Be Current on Policy Updates

Proprietary trading policies may change over time. It is essential to remain updated on these changes to continue being compliant.

How to Keep Updated

• Review your terms and conditions in your trading program regularly.
• Monitor announcements or updates from your trading firm.
• Be proactive in understanding how changes may affect your activities.

Being up to date with policy updates will ensure you stay in line with expectations and avoid accidental violations.

Key Takeaways

Compliance in propriety trading is not about a list of Do’s and Don’ts, but instead is a thought process that fosters a sense of trust, accountability, and professionalism.

Following the guidelines provided will hopefully protect you from hindrances in your trading journey, as well as allow you to prosper in a trading community that is fair and transparent. Try your best to make compliance a priority in the growth of your career and enjoy your future success.