What is a prop firm?

1. Two businesses share one name

Traditional proprietary trading is a selective employment or contract relationship. The firm puts its own capital at risk, often holds exchange memberships or broker relationships, and pays the trader a share of trading profits. Losing money costs the firm, so entry is competitive and oversight is direct.

Retail evaluation firms turned that structure into a product anyone can buy. You pay a fee, trade a simulated account against a published rule set, and if you pass, the firm issues a funded account with a profit split. You never deposit trading capital, and the firm never hands you cash to trade. The fee buys the attempt.

The two share a name and a profit split, and little else. Knowing which one you are dealing with is the first step: every retail prop firm is, contractually, a company selling evaluations and paying performance-based awards under its own terms.

2. How a modern evaluation works

The details vary, but the shape of the product is consistent across futures evaluation firms:

1. Choose an account size, such as $50,000 or $150,000, and pay the evaluation fee. Some firms bill monthly until you pass or cancel; others charge once.
2. Trade the account in the firm’s simulator. To pass, reach the profit target without breaking the loss, consistency, or position rules.
3. On passing, receive a funded account. Some firms charge an activation or setup fee at this point.
4. Trade the funded account under its own rule set and request payouts on the firm’s schedule. The firm pays a share of the profits, commonly 80 to 100 percent depending on the firm and the payout.

• Evaluations are simulated by design. Earn2Trade, for example, describes its evaluation as a virtual account with real market data: your fills come from the firm’s simulator, not from an exchange.
• Failing ends the attempt. Most firms sell a discounted reset or a fresh evaluation, which is how a single trader can spend several fees on one account size.
• The firm writes the rules, runs the simulator, calculates the numbers, and approves the payouts. Its dashboard, not your platform, is the authoritative record.
• You can rehearse the pattern before paying anything: Aeris includes practice accounts on live prices, so you can practice reaching a profit target while respecting a daily loss limit at no cost.

3. Simulated-funded versus live-funded accounts

Funded does not always mean live market capital. Many funded stages are still simulated accounts that pay real money for simulated performance. Apex Trader Funding describes its funded stage as Sim Funded, and Earn2Trade calls its funded stage LiveSim, which it describes as trading simulated capital using real-time market data.

Some firms move consistently profitable traders to live accounts, where orders reach the market through a broker. Live stages usually carry stricter rules. Topstep’s help center, for example, says its Daily Loss Limit is optional in the Trading Combine evaluation but automatic in the Live Funded Account, where hitting it flattens positions, cancels pending orders, and blocks new trades until the next session.

The practical point: in simulated stages the firm is your counterparty, and a payout is a contractual payment, not a withdrawal from a brokerage account in your name. Read the account agreement for the exact stage you are buying.

4. The rule types you will meet

Every evaluation combines a handful of rule types. The numbers differ by firm and account size; the categories are stable.

• Profit target: the gain you must reach to pass the evaluation or advance a stage.
• Daily loss limit: the most you may lose in one session before trading stops. Our guide to prop-firm daily loss limits covers session windows and liquidation behavior.
• Maximum or trailing drawdown: an account-level loss floor. A trailing version rises with your high-water mark and does not come back down; see trailing drawdown explained.
• Consistency rule: no single day may account for more than a set share of your total profit, which blocks one-lucky-day passes.
• Minimum or qualifying days: some programs require a count of trading or profitable days before a payout.
• Contract limits and scaling: a cap on position size, sometimes growing as your balance grows.
• Trading-window rules: session cutoffs, flat-by-close requirements, or restrictions around major news releases.

5. How retail prop firms earn revenue

The revenue mix is public and straightforward, and Apex, for example, advertises one-time fees with no recurring billing while other firms run subscriptions. In simulated stages there is also a structural fact to understand: most customers never reach a payout, so fee income exceeds payout costs. A firm that paid out more than it collected could not survive. That is not inherently dishonest, but it means the firm’s incentives differ from a broker’s, and the rules, simulator, and payout decisions all sit with the same counterparty that collected your fee.

A hypothetical example shows the arithmetic. Suppose an evaluation costs $150 per month, you pass on the third month, and the firm charges a $130 activation fee: the funded account has cost $580 before any payout. Fail twice and buy resets, and the same account can cost twice that. None of this is hidden, but it means the advertised account size, say $50,000, is not the price of admission. The cumulative fees are. When you price an account, list every line:

• Evaluation fees: monthly until you pass or cancel, or a single one-time charge.
• Resets and re-purchases: a discounted restart or a fresh evaluation after a failure.
• Activation fees: charged by some firms when you pass and take the funded account.
• Data and platform fees: added on some live stages.

6. The regulatory context

Futures themselves are tightly regulated: with limited exceptions, futures must be traded on an exchange by firms and individuals registered with the CFTC, and brokers handling customer funds register with the NFA. A simulated evaluation is not exchange trading, and a company that only sells simulated evaluations is generally not a futures broker. You usually cannot look one up in NFA BASIC the way you can a brokerage, and brokerage protections such as segregated customer funds do not apply to evaluation fees.

The sector’s largest enforcement episode shows both the risk and the limits of simple conclusions. In August 2023 the CFTC charged Traders Global Group, doing business as My Forex Funds, and its founder with fraud, alleging the company solicited customers for leveraged retail foreign exchange and commodity transactions, acted as the counterparty to substantially all customer trades, and took more than $300 million from customers. A court froze the defendants’ assets and appointed a receiver. Then, in May 2025, a federal judge dismissed the complaint with prejudice and sanctioned the CFTC, adopting a special master’s finding that the agency had misled the court, and ordered the agency to pay certain legal fees.

That case concerned leveraged retail forex, not futures evaluations, and its dismissal rebuked the regulator rather than vindicating any firm. The durable lesson is narrower: this sector runs on private contracts, not brokerage law. If a firm changes its rules, denies a payout, or closes, your remedies are contractual, so choose firms with a track record and keep records of everything.

Where Aeris fits

Aeris is a trading platform, not a prop firm, and it maps onto this article in practical ways. It is a native desktop app for Windows and macOS with a DOM, footprint charts, and chart trading with stops and targets, and it routes live futures orders through your own Rithmic login.

• Practice accounts on live prices: rehearse the evaluation pattern, reaching a target while respecting a daily loss limit, before you pay any firm a fee.
• Live futures through your own Rithmic login: the same app trades evaluation and funded accounts at firms that issue Rithmic credentials.
• Flatten and kill switch on every plan: one action flattens positions and blocks new orders when a session goes wrong, whatever stage account you are in.