How to Start Your Own Trading Firm: 4 Routes

"Trading firm" covers very different businesses. A two-person company trading its own account, an online evaluation business selling challenges to thousands of traders, a hedge fund and a forex broker are all called trading firms, and they sit under completely different rules. The single question that sorts them is: whose money is being traded, and who carries the loss?

This guide maps the four routes, mostly from a US starting point, and links to deeper guides for each. Our team operates prop firms, so the evaluation route is the one we know first-hand; the others are summarised from regulators and the sources listed.

What are the four kinds of trading firm?

Each route answers the money question differently.

Route 1: How do you start a proprietary trading firm with your own capital?

You form a company, fund it with your own (or your partners') money and trade it through a brokerage or clearing account. The SEC's broker-dealer guide says "individuals who buy and sell securities for themselves generally are considered traders and not dealers". The SEC tried to widen the dealer definition in 2024 to catch some principal trading firms, but a Texas federal court vacated that rule on 21 November 2024 and the SEC dropped its appeal in February 2025, according to Ballard Spahr.

The limits of this route are capital and people. Taking outside money, even from friends, can move you into Route 3; paying traders a share of profits raises employment and licensing questions in some places. Ask a lawyer before you add either.

Route 2: What is an evaluation prop firm?

An evaluation prop firm sells traders a challenge on a simulated account and pays rewards to those who pass and keep to the rules. It is a technology, risk and marketing business rather than a capital business, which is why it is the most common route for founders today. The hard parts are payments and trust: Stripe lists "funded prop trading" among prohibited financial products, so firms rely on high-risk processors and crypto.

We cover this route in depth in how to start a prop firm and are prop firms legal in the US.

Route 3: What changes when you trade other people's money?

Managing investors' money makes you an investment adviser and usually a fund manager. In the US that means state or SEC registration (or exempt reporting under $150 million for private-fund-only advisers), a Regulation D private placement and a Form D filing. If the fund trades futures or retail forex it is also a commodity pool: the NFA charges a $200 application fee and $750 a year in dues for a standard commodity pool operator, and $2,500 a year for a forex pool operator.

The full path is in how to start a hedge fund.

Route 4: What does it take to start a brokerage?

A brokerage handles client orders and often client money, so it is the most regulated route. A US retail foreign exchange dealer must maintain adjusted net capital of at least $20 million, rising with its retail forex obligations (17 CFR 5.7), and NFA dues for a retail forex dealer start at $125,000 a year for firms with $5 million or less in revenue.

Most new forex brokers therefore license offshore or in the EU and run a white-label platform. Our guides on white-label forex broker costs and white-label broker vs prop firm compare the economics.

How do you choose a route?

Answer these in order; the first "yes" usually decides it.

• Will anyone else's money be traded? If yes, you are on Route 3 or 4: speak to a securities lawyer before anything else.
• Will you hold client funds or route client orders? If yes, Route 4.
• Will you charge traders for access to simulated accounts? If yes, Route 2.
• Otherwise, you are trading your own capital: Route 1.
• Can you fund the regulatory capital, if any, and a year of running costs without revenue? If not, choose a lighter route first.

What does every trading firm need?

Whatever the route, the same foundations come up.

• A company in a jurisdiction your lawyer and your bank are comfortable with.
• Banking and payment rails that accept your model, agreed before launch.
• Written risk limits, even if the only trader is you.
• Legal documents that match the route: partnership agreements, terms and conditions, fund documents or client agreements.
• A website that states the entity, what the firm does and does not do, and the risks, in plain words.

Who builds websites for trading firms?

PipValley builds websites for prop firms, which our team also operates, and for the trading businesses next to them. For funds and proprietary trading firms see websites for hedge funds and trading firms; for brokerages see websites for forex brokers. We have not yet built a hedge fund or broker site for a client, and we say so up front.

Questions

Sources

1. SEC: Guide to broker-dealer registration
2. Ballard Spahr: SEC withdraws appeal of court decision to vacate its dealer rules (Feb 2025)
3. Stripe: Prohibited and restricted businesses
4. SEC: Capital raising building blocks, investment advisers (updated Sept 9, 2026)
5. NFA: Commodity pool operator registration
6. NFA: Membership dues and fees
7. Cornell LII: 17 CFR 5.7, minimum financial requirements for retail forex dealers
8. SEC: Filing a Form D notice