Demo Account Prop Trading Platforms Do Not Need Authorisation: Czech Regulator

Demo account prop trading services without real-market executions and subsequent settlements cannot be categorised as investment services under existing regulations, the Czech National Bank (CNB) recently clarified.

Demo Account Prop Trading Is Beyond Regulatory Scope

The clarification came months after the Czech regulator exclusively told Finance Magnates that some prop trading business models “may be subject to the MiFID regulatory framework.” With the recent clarification, it can be assumed that the CNB is differentiating between the two prop trading models: demo accounts and real accounts.

Interestingly, a majority of prop firms, including many major ones, offer demo account trading services. FTMO, a Czech-domiciled prop trading firm that generated $213 million in revenue in 2023, also offers demo account trading.

The CNB further explained that even if a certain activity formally meets the characteristics of one of the investment services but does not relate to any investment instruments, it cannot be categorised as an investment service under existing laws.

“The essence of simulated trading on a demo account with virtual funds is, simply put, the opportunity to try trading in a test environment, which allows you to work with real market data, but without entering and executing real trading instructions,” the CNB noted (translated from Czech). “It, therefore, follows from the very nature of this activity that it cannot meet the characteristics of the provision of investment services.”

“It is, therefore, not an activity subject to a CNB permit.”

The regulator also clarified that virtual funds used for simulated trading on a demo account do not meet the characteristics of electronic money, as they do not represent any claim against the entity that issued them.

Regulators Looking into Prop Trading

Meanwhile, several other regulators are evaluating their regulatory scope regarding prop trading platforms. Finance Magnates earlier exclusively reported that the European Securities and Markets Authority had conducted an initial review of such prop trading firms and had also discussed potential regulations for the industry. The Australian regulator also clarified that it is “monitoring the emergence of prop trading firms.”

However, regulators in Italy and Belgium have taken a harsher stance, issuing warnings against all prop trading activities, with one even calling them “video games.”

Demo account prop trading services without real-market executions and subsequent settlements cannot be categorised as investment services under existing regulations, the Czech National Bank (CNB) recently clarified.

Demo Account Prop Trading Is Beyond Regulatory Scope

The clarification came months after the Czech regulator exclusively told Finance Magnates that some prop trading business models “may be subject to the MiFID regulatory framework.” With the recent clarification, it can be assumed that the CNB is differentiating between the two prop trading models: demo accounts and real accounts.

Interestingly, a majority of prop firms, including many major ones, offer demo account trading services. FTMO, a Czech-domiciled prop trading firm that generated $213 million in revenue in 2023, also offers demo account trading.

The CNB further explained that even if a certain activity formally meets the characteristics of one of the investment services but does not relate to any investment instruments, it cannot be categorised as an investment service under existing laws.

“The essence of simulated trading on a demo account with virtual funds is, simply put, the opportunity to try trading in a test environment, which allows you to work with real market data, but without entering and executing real trading instructions,” the CNB noted (translated from Czech). “It, therefore, follows from the very nature of this activity that it cannot meet the characteristics of the provision of investment services.”

“It is, therefore, not an activity subject to a CNB permit.”

The regulator also clarified that virtual funds used for simulated trading on a demo account do not meet the characteristics of electronic money, as they do not represent any claim against the entity that issued them.

Regulators Looking into Prop Trading

Meanwhile, several other regulators are evaluating their regulatory scope regarding prop trading platforms. Finance Magnates earlier exclusively reported that the European Securities and Markets Authority had conducted an initial review of such prop trading firms and had also discussed potential regulations for the industry. The Australian regulator also clarified that it is “monitoring the emergence of prop trading firms.”

However, regulators in Italy and Belgium have taken a harsher stance, issuing warnings against all prop trading activities, with one even calling them “video games.”

This post is originally published on FINANCEMAGNATES.

  • Related Posts

    Weekly Snapshot: Prop Firm Funded Unicorn’s A-Book Bet Ends in Failure, Is FxPro Entering Crypto Next?

    Unraveling of the prop firm Funded Unicorn How far-reaching are the consequences of failure in risk handling for prop trading firms? The closure of Funded Unicorn, one of Germany’s top…

    Swissquote Secures Full Ownership of Yuh After Four Years, Buying Out PostFinance’s 50% Stake

    Hear what Victoria Sarri from XM had to say about the impact it had on her team.🏆 This year’s awards are now open for nominations. Is your brand ready to…

    Leave a Reply

    Your email address will not be published. Required fields are marked *

    You Missed

    Weekly Snapshot: Prop Firm Funded Unicorn’s A-Book Bet Ends in Failure, Is FxPro Entering Crypto Next?

    • July 5, 2025
    Weekly Snapshot: Prop Firm Funded Unicorn’s A-Book Bet Ends in Failure, Is FxPro Entering Crypto Next?

    How to Trade Around SDR Allocations and IMF Announcements?

    • July 4, 2025
    How to Trade Around SDR Allocations and IMF Announcements?

    Swissquote Secures Full Ownership of Yuh After Four Years, Buying Out PostFinance’s 50% Stake

    • July 4, 2025
    Swissquote Secures Full Ownership of Yuh After Four Years, Buying Out PostFinance’s 50% Stake

    XAU/USD: Elliott Wave Analysis and Forecast for 04.07.25 – 11.07.25

    • July 4, 2025
    XAU/USD: Elliott Wave Analysis and Forecast for 04.07.25 – 11.07.25

    WTI Crude Oil: Elliott Wave Analysis and Forecast for 04.07.25 – 11.07.25

    • July 4, 2025
    WTI Crude Oil: Elliott Wave Analysis and Forecast for 04.07.25 – 11.07.25

    USD/JPY: Elliott Wave Analysis and Forecast for 04.07.25 – 11.07.25

    • July 4, 2025
    USD/JPY: Elliott Wave Analysis and Forecast for 04.07.25 – 11.07.25