Retail proprietary trading has slipped down the European regulatory agenda, despite rapid market growth and structural shifts in the sector. Dr George Theocharides, Chairman of CySEC and ESMA's Chairman of the Risk Standing Committee, told Finance Magnates that, to the best of his knowledge, ESMA is not currently engaged in any substantive discussions regarding retail prop trading.
Only two years ago, regulators in Paris held initial discussions about oversight of retail prop trading. At the time, a widely held view in the market was that the segment might be brought under MiFID II, particularly the provisions governing traditional proprietary trading. A year ago, Theocharides described retail prop trading as being "on the radar." However, it now appears that the sector has moved down the regulatory pecking order and out of the active discussion.
ESMA itself declined to comment on the matter. Theocharides explained that, while retail prop trading may still be monitored as part of broader market developments, it does not appear to rank among the authority's immediate priorities, citing the relatively limited size of the sector.
Market Growth and Structural Shifts
Despite the lack of immediate regulatory focus in Europe, interest in retail prop trading has been rising. Germany saw an explosive surge of over 1,050% in search queries for "prop firm," with February 2026 marking the peak. At the same time, retail prop firm and regulated brokerage models are increasingly converging.
Several notable transactions and launches highlight this convergence: FTMO acquired retail broker OANDA, prop firm The Trading Pit launched CFD broker TTP Markets, and major Australian broker Axi introduced its prop arm Axi Select. Earlier, in 2024, MetaQuotes had disrupted the industry by revoking MT4 and MT5 licenses from prop firms, pushing many players to rethink their business models.
According to FM Intelligence, between early 2024 and late 2025 up to 100 prop firms ceased operations, eliminating nearly 14% of the market. This contraction has occurred alongside rising retail interest and ongoing adjustments in the operating structures of remaining firms.
Diverging Regulatory Paths Between Europe and the US
While Europe appears to have shelved discussions about specific regulation for retail prop trading, developments in the United States point toward tighter oversight. Large American prop firms are beginning to seek registration with the CFTC. Major players such as Topstep are now registered introducing brokers (IBs), a status that allows them to pass client orders to a Futures Commission Merchant (FCM) for execution and clearing. Plus500, for example, acts as Topstep's FCM.
The current regulatory stalemate in Europe is expected to continue. According to the view presented, it may take a significant scandal or high-profile incident, similar to the My Forex Funds case, to push retail prop trading back onto ESMA's radar and revive substantive regulatory debate.
