FTMO Branches Out into Brokerage, Another Way Out for Fellow Prop Firms

Last week, we at Fazzzaco couldn't help but noticed several financial media outlets covered the appointment of Michael Kamerman, former CEO of Skilling, a retail forex broker, by FTMO, a major player in the proprietary trading industry. Kamerman's move to FTMO signifies more than just a typical executive shift within the industry; in fact, he brings with him extensive experience in the forex brokerage sector. Prior to his tenure at Skilling, where he spent four years, Kamerman had a lengthy 15-year stint at FXCM, a leading forex brokerage giant.

Kamerman's move sends a message to the prop trading community, which has recently faced regulatory scrutiny, indicating FTMO's intention to branch out into brokerage. Typically, especially during the past few years when everyone was crazy about prop trading, we've witnessed the opposite, and that is brokers branching out to prop, not the other way around.

FTMO Is Becoming A Broker! But Not Yet

Just like The5ers, FTMO stands as a preferred industry giant among prop traders. According to the group's tax records, their profit levels are comparable to major forex brokers out there. While several financial media outlets reported Kamerman's appointment and FTMO's announcement of venturing into brokerage business, it's noteworthy that FTMO itself hasn't formally announced it on platforms including LinkedIn. As of our writing, we went to their website (https://ftmo.com/) and found out that the disclaimer at the bottom of the page still states, "FTMO companies do not act as a broker and do not accept any deposits."

It's evident that FTMO currently doesn’t have a definitive schedule for when it will launch its new brokerage business, so the smart move for now is to wait for their official announcement.

That said, the prop firm has previously expressed intentions to transition into a broker. Otakar Suffner, co-founder and CEO of the company, explicitly stated in an interview several months ago that FTMO has plans to enter the brokerage business, citing that they already have all the apps necessary for a broker, strong brand awareness, and reputation. However, he also noted that this transition won't happen overnight and could potentially take several years.

In Face of Regulatory Pressure: Different Platforms, Different Fates

The regulatory pressures that prop firms doing business in the US had gone through over the past few years need no further elaboration, as we have already published numerous articles on this topic. Despite being a leader in the industry, FTMO hasn't been spared and has also faced restrictions on its offerings​. Consequently, they've informed clients that starting from February 19, 2024, all U.S. customers (including citizens and residents) won't be able to avail themselves of their services. Suffner believes that for a newly established institution like themselves, uncertainty is unavoidable, and sometimes, in order to maintain compliance, certain sacrifices must be made. Although the U.S. market is significant, it's not worth risking the entire FTMO business for it.

For other prop firms, most of them have been forced to migrate platforms due to regulatory pressures. Moreover, amidst the storm of the past few months, many smaller, less resilient firms have opted for closure. For instance, in mid-May, after facing regulatory warnings, license revocations, operational suspensions, and service resumptions, Hungary-based prop trading firm True Forex Funds announced the permanent closure​. Meanwhile, The Funded Trader, a U.S.-based prop firm, first ceased all operations, then announced restructuring, and in May, declared to restart in the Cayman Islands​. Just a few days ago, Fazzaco also learned that SurgeTrader, a prop trading firm based in Florida, has ceased its operations​ after its license for the Match-Trader platform, provided by Match-Trade Technologies, was suspended a week ago.

A Few More Words Regarding Prop Trading Regulations...

Since prop trading is a global business, law enforcement must cooperate to stop instances in which businesses exploit legal gaps. Because substantial losses could have an impact on the stability of the financial system, regulators are also attempting to determine how to promote innovation while guarding against excessive risk.

The Commodities Futures Trading Commission (CFTC) has stepped up its oversight of prop trading businesses in response to alleged fraudulent activities. This has led to a detailed investigation of the prop trading sector. Because of this and the lack of regulations, prop businesses need to make sure they are conducting business responsibly.

That is to say, their actions ought to surpass merely adhering to the text of the law. Prop firms ought to prioritize openness, beginning with the public exchange of data on finances, operations, and variables that influence decisions. There are firms already started doing this in a constructive way, and perhaps this trend will continue.