Funded account

The second half of a two stage commercial arrangement offered by a proprietary trading firm to retail participants. An evaluation is attempted for a fee against stated profit targets and loss limits; passing it grants access to an account described as funded, on which the participant follows the firm's rules and becomes entitled to a share of any profit recorded. The capital is the firm's, the account is generally simulated, and the participant has no client money in it.

Two properties follow and neither is incidental. The relationship is contractual rather than regulated, so where no licence applies there is no segregation requirement, no supervised complaints route and no compensation arrangement, whatever the reason for their absence. And the payout terms are the whole of the enforceable position: what triggers a payment, what defers one, what forfeits one, and what the firm may change unilaterally are all questions answered by the contract and by nothing else.

The arithmetic of the arrangement is worth stating without judgement. The fee is spent whether an attempt ends at the target or at a limit, and where a retry is permitted it is spent again, so the participant's outlay is certain while the payout is contingent on completing an attempt and then recording a profit. A simulated loss does not make the arrangement free of loss; it relocates the loss from the position to the fee.