Proprietary trading firms (prop firms) are not regulated financial institutions because they do not hold or manage client funds directly.
All trading activity provided by prop firms typically takes place in a simulated environment, not live markets. Trades may be executed through regulated brokers, who hold real funds and operate in live markets, but the prop firm’s capital and challenges are virtual and designed for performance evaluation purposes only.
Prop firms provide traders with access to simulated capital and performance challenges but do not act as brokers or custodians of funds.