Let’s first explore what proprietary trading is
Proprietary trading also known as prop trading refers to a trading practice in which a trader uses a trading firm’s simulated capital rather than risking their own personal capital. It is often viewed as a financial practice in which a firm utilizes its market and financial knowledge to generate profit. Essentially, it is a platform for modern traders who can navigate various risks and challenges to achieve profits.
The profit is divided between the trader and the prop firm. Usually, trading platforms share 40% -60% profit. While some share 100% profits.
How does it work?
Initially, the trader has to pass through the evaluation process by passing challenges, being consistent, and taking risks. The registration fee is also applicable at this stage. Once this stage is successfully passed, the prop trading firm provides a trader with their own trading account.
In the trading account, the trader uses the Prop firm’s simulated fund and starts to earn. Some firms offer high profit splits and flexible rules. While some firms have stringent rules.
Subsequently, the Prop firm shares profit splits with the traders. Some firms even offer weekly withdrawals and a high profit split to ensure that traders benefit from their trading success at early stages.
How are traders at risk?
While Prop Trading sounds Lucrative, it carries risks. Traders are often subject to strict performance metrics. Their performance is monitored throughout, and if they fail to meet the criteria, they lose the traded amount or, in some cases, even face penalties.
Some restrictions imposed are the maximum drawdown and daily loss limits. Also, profit splits depend on firm to firm. Furthermore, most Prop trading firms charge an upfront fee for evaluation.
What things can be taken into consideration before trading with prop firms?
Before initiating prop trading, the trader must carefully go through the rules and regulations provided on firm’s website. Read the terms and conditions meticulously and ask questions in case of any ambiguity.
How DY lawyers as trading lawyers in Dubai can help?
We are proud to say that at DY Lawyers and Legal Consultants, we have an expert team of legal professional who have successfully helped modern traders in situations where their payouts were not deliberately released by the prop trading firm, which provided vague reasons for breach of terms without any valid evidence.
Not only this, at DY, we help traders, before they start their trading journey by performing due diligence upon the prop trading firm. This saves traders from engaging with firms that are not registered in UAE.
Successful payout and legal action by DY Lawyers
Scenario 1- Clients approach us after they have successfully passed the challenges and upgraded to funding accounts but are later denied payout by Dubai-based Prop Firms on vague and irrelevant grounds of breach- without providing concrete evidence as to why the payout was denied.
At DY Lawyers, we understand how frustrating it is when trades put in the work, clear every trading phase, and are then denied their payout without proper justification.
Our team at DY Lawyers & Legal Consultants has dealt with multiple prop-firm disputes where payouts were withheld under vague “breach” claims. We know exactly how these firms operate and how to hold them accountable under UAE law.
Scenario 2- Through our due diligence process, we have also informed our clients that a few Prop firms which denied payouts had license numbers and company names displayed on their website that did not match any records on the UAE Government’s official company registry portal. Based on the company’s website and operations, theys appear to be benefiting in ways that could amount to a breach of UAE regulations.
Scenario 3- A Dubai based prop firm changed its FAQ terms and conditions after the trader-initiated funding. Earlier, their website stated that there was no limit on the number of lots placed and that a stop loss is not required. Later, after the trader passed the challenges and the profit was to be split between the trading firm and the trader, this prop firm changed its terms and conditions, implemented a limit on lots placed, and subsequently denied the payout with no legitimate reason.
DY Lawyers issued a legal notice to the prop trading firm, warning them regarding their unfair practices. The Dubai-based prop trading firm not only shared the 95% profit but also refunded the initial evaluation fee to our client.
Conclusion
Traders can safeguard their interest by conducting due diligence of any broker or platform of trading in UAE with the help of DY Lawyers and Legal Consultants. We help you choose the right platform for trading by performing legal due diligence.
These trading firms can only provide services such as Broker-dealer services, Custody services, exchange services, custody services (including custodial staking, advisory services, management and investment services, exchange services (including VA derivative trading), lending and borrowing services only after obtaining license from VARA.
You can save millions from losing just by hiring DY Lawyers and Legal Consultants, trading lawyers in Dubai.
We haves successfully acted for clients to recover their funds here in the UAE.