Consob States That These Prop Trading Firms Are Essentially Setting Traps to Deceive Investors
Italy's securities regulatory authority, Consob, recently issued a warning to investors, stating that retail prop trading activities carry high risks. They describe these activities as online trading simulation games that promise big profits but are likely to leave you financially ruined.
The Italian regulator's description of the prop trading industry is quite interesting and completely different from what the companies operating in this field claim.
The regulatory authority says these companies advertise on websites and social media, claiming to test traders' skills, and use fancy names like "shadow investment games," "capital trading," "financial trading accounts," and the like. These simulation challenges (games) usually require traders (players) to sign up for paid training courses before they can participate in online trading challenges.
Consob says these programs typically start players with virtual trading and gradually progress to so-called real trading using funds provided by self-proclaimed "prop trading firms." To attract participants, these companies claim they will share profits with players.
The regulatory authority emphasizes that while these simulation games look like financial video games, they actually pose very high risks for investors and could potentially result in the loss of all invested money.
Consob states: "We have received several complaints from users. Some complain that the tests are too difficult, feeling they are intentionally designed to be challenging, forcing 'players' to keep trying repeatedly; others complain that they never received the promised profit sharing."
More and More European Regulatory Authorities Are Issuing Warnings About Prop Trading
Financial market regulators in Belgium (FSMA) and Spain (CNMV) have also issued similar warnings, indicating that European regulatory authorities are increasingly concerned about this issue.
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