There is no denying that the institutional prop trading model has become much more powerful this year.
The established firms have continued to eat the banks’ lunch, particularly in electronic market-making. Non-bank trading firms generated an estimated $114 billion of revenue in 2025 (an increase of 45% over the previous year), with proprietary trading revenue up almost 60% to $84.3 billion, according to analysis by Crisil Coalition Greenwich.
That momentum has carried into 2026. Hudson River Trading, for example, reported a hefty $11.4 billion in quarterly trading revenue for the quarter ending June, helped by market volatility and AI-related equity moves.
Rival Jane Street fared less well after taking a bath on hedge fund Situational Awareness and some of its AI stock investments, yet still managed to generate more than $40 billion in net trading revenues in the last 12 months.
Prop Firms Engaging In Longer-Horizon Strategies
It is clear that prop firms are no longer primarily ‘high frequency equity traders’ and that the leading firms are expanding across fixed income, crypto, ETFs, derivatives and increasingly longer-horizon quantitative strategies.
They are also investing heavily in AI infrastructure, computing capacity and machine learning systems. This is particularly important because the competitive advantage is increasingly moving away from simply having faster connectivity as firms leverage AI to improve signal generation, execution, market making, pricing, risk management, research and automated strategy development.
Hudson River Trading’s recent results are a good illustration of this trend since the firm has been investing heavily in AI infrastructure while its trading revenues have surged.
The arms race of quant funds making vids about water cooling AI data centres is unreal.
Hudson River Trading uses one in Norway cooled by fjord seawater. It’s piped into a former mountain-side mineral mine now hosting GPU racks.
Heated water sent to a land-based salmon farm… https://t.co/kujH2ZzjKV pic.twitter.com/oBzPE8P1Dr
— Trung Phan (@TrungTPhan) May 18, 2026
This is creating a potentially important scale advantage since the largest firms can afford vastly more computing power and data than smaller prop shops.
If we look at the retail space specifically, the market has moved from explosive growth to consolidation and survival of larger operators. But this shouldn’t be interpreted as the market shrinking, as the surviving businesses are becoming larger and more sophisticated.
Retail Demand Is Also Catching Up
One data provider estimates that revenues from retail-funded traders will exceed $4 billion this year, and there could be 1.4 million active funded accounts by the end of 2026. Trader rewards and payouts are projected to reach $2.2 billion.
One of the most interesting market trends is the extent to which futures prop trading has taken market share from the traditional CFD model.
Retail prop firms are increasingly offering futures evaluations, rather than relying exclusively on CFDs/FX. One industry survey found that a $100,000 futures evaluation averaged about $193, compared with $419 for a comparable CFD evaluation.
The cheapest funded capital products are increasingly futures-based for a number of reasons, including transparent exchange-traded markets, established futures infrastructure, easier risk parameters, strong retail interest in index futures and fewer of the regulatory complications surrounding leveraged OTC CFDs.
Meanwhile, the economics of funded accounts are becoming much more competitive. Prop firms are increasingly competing on the terms of the challenge, rather than simply on the size of the nominal trading account.
Research published last month revealed that almost two-thirds of programmes offered profit splits of 90% or more and that nearly one in four advertised a 100% tier. In addition, just over half of the challenges had eliminated consistency rules, and around a quarter of products offered instant funding without an evaluation.
These figures suggest that the industry is becoming more consumer-friendly, but they don’t tell the full story. Headline account size is becoming less meaningful – a $100,000 or $200,000 ‘funded account’ doesn’t mean the trader has anything close to that amount of risk capital.
The Regulators Need a Clear Border
While all the above have been going on, regulation has become a much bigger issue. Regulators are increasingly questioning where the boundary lies between genuine proprietary trading, simulated trading, CFD/derivatives brokerage and gambling-like retail speculation.
At the institutional end, the FCA is debating the opposite issue: whether specialist trading firms should have lower capital requirements than banks. The UK financial regulator has proposed changes intended to make capital rules more proportionate for firms such as Jane Street and Citadel Securities, but the Bank of England has raised financial stability concerns.
This leaves the industry with two distinct regulatory trajectories. On the one hand, regulators are debating how much regulation is appropriate for increasingly important non-bank market makers. In the retail prop space, they are increasingly scrutinising whether funded-trader models constitute regulated financial services.
The Indian market, in particular, is illustrating how algorithmic trading is widening the gap between professional prop firms and retail traders.
The most recent data from the Securities and Exchange Board of India shows that proprietary traders generated roughly 440 billion rupees of gross trading profit in the latest financial year, while 99% of the profits earned by proprietary traders and foreign portfolio investors came from algorithmic trading entities.
At the same time, 87.7% of individual derivatives traders lost money. This figure illustrates the fundamental structural change occurring throughout the market whereby retail traders are increasingly competing against firms whose advantage comes from algorithms, data, infrastructure and extremely low execution latency.
What conclusion can we draw from all of this? Perhaps the key takeaway is that prop trading is becoming two very different industries.
At the top end, firms such as Jane Street, Citadel Securities and Hudson River Trading increasingly resemble technology companies that happen to trade financial markets. At the retail end, funded- trader companies are evolving into high-volume financial platforms whose core business is selling access to trading capital/evaluations.
There is no denying that the institutional prop trading model has become much more powerful this year.
The established firms have continued to eat the banks’ lunch, particularly in electronic market-making. Non-bank trading firms generated an estimated $114 billion of revenue in 2025 (an increase of 45% over the previous year), with proprietary trading revenue up almost 60% to $84.3 billion, according to analysis by Crisil Coalition Greenwich.
That momentum has carried into 2026. Hudson River Trading, for example, reported a hefty $11.4 billion in quarterly trading revenue for the quarter ending June, helped by market volatility and AI-related equity moves.
Rival Jane Street fared less well after taking a bath on hedge fund Situational Awareness and some of its AI stock investments, yet still managed to generate more than $40 billion in net trading revenues in the last 12 months.
Prop Firms Engaging In Longer-Horizon Strategies
It is clear that prop firms are no longer primarily ‘high frequency equity traders’ and that the leading firms are expanding across fixed income, crypto, ETFs, derivatives and increasingly longer-horizon quantitative strategies.
They are also investing heavily in AI infrastructure, computing capacity and machine learning systems. This is particularly important because the competitive advantage is increasingly moving away from simply having faster connectivity as firms leverage AI to improve signal generation, execution, market making, pricing, risk management, research and automated strategy development.
Hudson River Trading’s recent results are a good illustration of this trend since the firm has been investing heavily in AI infrastructure while its trading revenues have surged.
The arms race of quant funds making vids about water cooling AI data centres is unreal.
Hudson River Trading uses one in Norway cooled by fjord seawater. It’s piped into a former mountain-side mineral mine now hosting GPU racks.
Heated water sent to a land-based salmon farm… https://t.co/kujH2ZzjKV pic.twitter.com/oBzPE8P1Dr
— Trung Phan (@TrungTPhan) May 18, 2026
This is creating a potentially important scale advantage since the largest firms can afford vastly more computing power and data than smaller prop shops.
If we look at the retail space specifically, the market has moved from explosive growth to consolidation and survival of larger operators. But this shouldn’t be interpreted as the market shrinking, as the surviving businesses are becoming larger and more sophisticated.
Retail Demand Is Also Catching Up
One data provider estimates that revenues from retail-funded traders will exceed $4 billion this year, and there could be 1.4 million active funded accounts by the end of 2026. Trader rewards and payouts are projected to reach $2.2 billion.
One of the most interesting market trends is the extent to which futures prop trading has taken market share from the traditional CFD model.
Retail prop firms are increasingly offering futures evaluations, rather than relying exclusively on CFDs/FX. One industry survey found that a $100,000 futures evaluation averaged about $193, compared with $419 for a comparable CFD evaluation.
The cheapest funded capital products are increasingly futures-based for a number of reasons, including transparent exchange-traded markets, established futures infrastructure, easier risk parameters, strong retail interest in index futures and fewer of the regulatory complications surrounding leveraged OTC CFDs.
Meanwhile, the economics of funded accounts are becoming much more competitive. Prop firms are increasingly competing on the terms of the challenge, rather than simply on the size of the nominal trading account.
Research published last month revealed that almost two-thirds of programmes offered profit splits of 90% or more and that nearly one in four advertised a 100% tier. In addition, just over half of the challenges had eliminated consistency rules, and around a quarter of products offered instant funding without an evaluation.
These figures suggest that the industry is becoming more consumer-friendly, but they don’t tell the full story. Headline account size is becoming less meaningful – a $100,000 or $200,000 ‘funded account’ doesn’t mean the trader has anything close to that amount of risk capital.
The Regulators Need a Clear Border
While all the above have been going on, regulation has become a much bigger issue. Regulators are increasingly questioning where the boundary lies between genuine proprietary trading, simulated trading, CFD/derivatives brokerage and gambling-like retail speculation.
At the institutional end, the FCA is debating the opposite issue: whether specialist trading firms should have lower capital requirements than banks. The UK financial regulator has proposed changes intended to make capital rules more proportionate for firms such as Jane Street and Citadel Securities, but the Bank of England has raised financial stability concerns.
This leaves the industry with two distinct regulatory trajectories. On the one hand, regulators are debating how much regulation is appropriate for increasingly important non-bank market makers. In the retail prop space, they are increasingly scrutinising whether funded-trader models constitute regulated financial services.
The Indian market, in particular, is illustrating how algorithmic trading is widening the gap between professional prop firms and retail traders.
The most recent data from the Securities and Exchange Board of India shows that proprietary traders generated roughly 440 billion rupees of gross trading profit in the latest financial year, while 99% of the profits earned by proprietary traders and foreign portfolio investors came from algorithmic trading entities.
At the same time, 87.7% of individual derivatives traders lost money. This figure illustrates the fundamental structural change occurring throughout the market whereby retail traders are increasingly competing against firms whose advantage comes from algorithms, data, infrastructure and extremely low execution latency.
What conclusion can we draw from all of this? Perhaps the key takeaway is that prop trading is becoming two very different industries.
At the top end, firms such as Jane Street, Citadel Securities and Hudson River Trading increasingly resemble technology companies that happen to trade financial markets. At the retail end, funded- trader companies are evolving into high-volume financial platforms whose core business is selling access to trading capital/evaluations.
