Trading business is a field where it is possible to make money relatively quickly, starting from a small base capital. Prop trading is part of this sphere: advanced software and modern trading tools will support a fresh idea or a well-established strategy, simplifying and speeding up the execution of secure processes. Platforms running on high-performance capacitive servers serve up to 50-200 thousand accounts per environment. Flexible API support to integrate processes and ensure seamless asset management according to objectives and applicable standards with monitoring dashboards - an excellent basis for analyzing business success and strategies for business progress.
Basic principles of CRM development on prop-platforms
Indicators of operational profitability are visualized and reportable-tabular information with a list of transactions, statistics segmented by revenue and disbursement categories. It also helps in strengthening fraud protection. ToV's communication style and uniform branding accustoms customers to the platform. Seamless adaptation of payment technologies in CRM improves the processes of scaling and customization of user portals - novice and experienced traders, mentors who have trained over 100-1000 students.
Prop platform automation is not only suitable for trading fiat, derivatives and equities. The list of operating assets in a particular ecosystem includes:
commercial and luxury real estate, homeownership;
cryptocurrency and tokens;
energy and rare earth metals (particularly lithium);
land and food resources (oilseeds and grains, honey, meat and animal fats).
Traders consider the availability of funds and what distribution model formulas the owners use, how advanced and new the prop trading software is. The interface under the browser version, cross-platform and mobile applications should be clear, crisp and responsive to commands. Tools that eliminate and prevent rate slippage to avoid financial losses on trades, narrow spreads that match market boundaries, copying profitable trades from leaders, and multiple payment gateways with advanced trade processors enhance CRM capabilities.
Algorithm for grading profitability and rewarding traders
Multilevel encryption system is an indispensable attribute of brokers and traders' work. It includes tracking and package offers as part of diversification of profit sources. Algorithmic protocols should be developed to evaluate the broker's success and more capital should be allocated when the market participant's profitability and transaction volumes increase. The gradations of traders' rewards can look like in the chart below.
Operating amount under management, $
Profitability level, %
Total profit, $
Commission, %
Trader's income, $
1000
72
720
50
360
2000
54
1080
60
432
5000
34
1700
75
425
10000
49
4900
70
1470
20000
68
13600
55
6120
50000
52
26000
60
10400
100000
29
29000
80
5800
The level of profitability of traders' business a priori decreases slightly when increasing the total assets provided for management, because up to 30% of transactions will be unprofitable. If a trader with $1000 showed profitability of 72%, then gradual provision of funds to him up to $50 thousand will provide a profit of 50% and higher, bringing to $26 thousand income (40% of the total profit). If the trader managing $100 thousand showed 29% profitability, his remuneration is reduced to 20% or $5800.
The commission charged by the broker can vary greatly, being within 50-80%. Therefore, the total income of a successful trader, who has $50 thousand at his disposal, will be higher by $4.6 thousand than that of the one who has profitability less in 2 times, but has $100 thousand at his disposal.
Here is the mathematical background of the proprietary trading technology: money given to management is returned with greater or lesser profit thanks to the well-established work of CRM system and the platform tools themselves. At the first stage of trader selection, serious companies perform KYC-checking - and it is easier to do it in automatic mode. Further, the built-in change of rating and % of remuneration can also be partially regulated by the system, taking into account increases in % of profitability and exceeding a certain threshold of profit in units of value (global reserve currencies, growing or low-volatility crypto).
PWAs and services for the proprietary trading ecosystem
PWA web application, written in JavaScript, makes it extremely easy to trade in the course of rate movements and fluctuations. Its architecture is based on a combination of technologies and parameters needed to reach the target level. PWA's special feature:
fast operation regardless of ISP speed;
a mentally and visually pleasing analytics and data sharing process;
addition of tools similar to those that work on the platforms developed by Merehead (like Match-Trader and TradingView);
compatibility with iOS and Android devices.
Such functionality makes it easy for several dealing centers and broker systems to work together, including, in addition to the usual ones, a hybrid model of placing several trading software on one server. Integration of various applications into the platform creates a unified trading ecosystem. The backend structure includes many charts and histograms, indicators and customizable graphic editors for drawing. Additional convenience is provided by services:
managing broker back office systems and applications;
admin creation and customization of tools, charts and feeds, editing manager profiles and other routing processes;
API for managers to manage clients' finances and assets;
generation of business-analytical reports on SQL server (“candles”, Websocket and FIX protocols);
multi-channel trading on different applications and seamless gateways like Match2Pay.
Embedded tools used in the software development process include:
for risk assessment and cybersecurity - RiskMan, Tradovate and Actant RISK, NordVPN and McAfee Firewall;
for data analysis and back-testing - QuantConnect, AlgoTrader and Amibroker;
automatic algorithmic research - QuantConnect, AlgoTrader and MultiCharts;
visualization and forecasting - MetaStock, Optuma and ThinkorSwim;
trend and news monitoring - Bloomberg Terminal, Refinitiv Eikon and TradingView.
MAM- and PAMM-accounts modules, IB provide creation of 50 and more structure levels, web-sockets - streaming of quotes. In the format of interval candlesticks the graphical data display is exported. The functionality is complemented by automatic evaluation of KPIs using the module, client bonus systems in fixed and percentage format, history of financial managers' actions and comparative profitability of brokers and traders. This is very similar to binary options software except that the platforms interact with licensed brokers. Aslo, trading systems are adapted to MT4 and MT5, cTrader and xStation platforms, embedding indicators for monitoring account profitability.
Automation, customization and updating of software functionality for platforms
Automation plays an important role in the proprietary trading process: a certain % of attracted leads become investors, and customized onboarding increases the number of traders. Simplified two-way exchange between fiat and cryptocurrencies (deposits, transfers, withdrawals) with minimal fees using Praxis Cashier and PSP integrators optimize trading processes.
Bridges connect platforms to multiple vendor liquidity pools LMAX or Currenex, CFH and xStation, Match-Trader and Utip, which work with the platform and exchanges via an LP connection with the help of a market maker to place orders and run auctions. Hedging settings and its scale are reflected on the monitor, and the multiple LP connection complements the transaction functionality. Thanks to these parameters, routing and the absence of plug-ins on the servers of financial platforms:
time and economic costs of working on A-Book and B-Book models are minimized;
financial flows segmented by different spreads and multipliers are accelerated;
orders are protected depending on the risk level;
stop loss and take profit price execution with precise marker to avoid slippage.
Consolidating or combining orders saves time and prevents possible errors. If a continuous execution function is required, large orders are split into parts and executed according to specific time frames. This technique optimizes pricing, raising it to the limit level. The final financial picture is calculated using the weighted average VWAP price. In workflows, the exchange depth of the VWAP, stability and duration of delays, and integration with bridge providers are evaluated using prop-trading tools.
Development of a prop trading platform will cost $40-60 thousand. Depending on the chosen location of prop trading, Merehead also helps to choose and connect hosting in the right location (USA or Singapore, EU countries) and cross-connection, supplemented with protection against DDoS attacks. Permanent updating of functions for clients and investors, brokers and traders with customization of certificates for each type of accounts expands the field of opportunities and increases competition, thus attracting more market participants.
Unusual options: certificates and built-in features
Competitions between traders with the result in the form of financial rewards are a dynamic welcome for a pro-trading platform. A press release about the start date, with ID and terms and conditions provides an opportunity to prepare for participation and join in time. Of course, confidentiality should prevent hacking of leaders' accounts, allowing to know by balance sheet and capital size of participants. Among the indicators taken into account can be ratios and strategies, according to the results of which for a particular period of time best showed trading in selected currencies or crypto. In addition to financial awards, the best traders are given certificates in specific categories. The same certificates are generated automatically in case of passing certain milestones in 10-25 patterns.
The results can be displayed in a leaderboard so that traders can copy the actions of the best participants to increase their own profits and develop new techniques as a result of identifying patterns. In order to avoid fraud, it is also necessary to stop trades, which imitate successful operations and grid trading in a narrow timeframe. For this purpose, the software uses timeframe analysis, sorting by filters and patterns.
The proprietary style of the proprietary platform involves the implementation of customized specialized software for high-frequency trading, embedding linear, probabilistic and stochastic algorithms. This approach increases the value of the technology stack and provides market advantages due to adaptability, increased privacy protection and back-office integration. The price of this development option with project timelines ranging from 3 months to six months ranges from $60-120k.
The list of connected software includes functions of auto-closing on targets and blocking excessive drawdown, advisors and work without swaps, holding the exchange rate for several days. In addition to classic currency pairs, the software includes synthetic tools where traders offer the exchange of exotic or unusual cryptocurrency-fiat pairs. The task of such a service is to diversify and uniquely characterize the portfolio, increasing profits by reducing business risks.
Prop trading business models and overview of revenue generating firms
The business of prop trading firms is not limited to fiat and cryptocurrency trading. It includes trading opportunities in:
commodities - as exemplified by BlackRock, which invests in high-risk assets with marginal volatility but priced within 10-20% of the market;
rare earths, homogeneous (base metals, ferrous) and precious metals;
stocks and futures on DXtrade and Interactive Brokers with Jigsaw and MT5, NinjaTrader and R Trader Pro with Rithmic and Sterling Trader Pro, ThinkTrader with TopstepX, TradeLocker and TradingView, Tradovate and cTrader;
energy carriers (natural and liquefied gas, oil and coal, electricity from geothermal and renewable sources).
What is important for clients are the risk indicators and trust rating scores of proprietary companies, the duration of their operation, the amount of leverage and spreads, commissions and analytics, and the availability of the pool of assets. For example, BlackBull Markets has been operating in the trading market for 11 years, the trust level is 78 points out of 99, the number of currency pairs is limited, but there are CFDs. ACG's server is located in the US, but the firm has British-Chinese owners, offshore registration in Seychelles for less than 5 years with a leverage of 1:100. Bybit exchange is 7 years old, leverage is 1:100, there is an opportunity to open different orders for short and long positions) with different leverage. 17.6% of the exchange's clients are Japanese, 9.9% are Americans, 8.9% are Koreans and 8.2% are Germans, which confirms the rating of 9.6 out of 10.
QuanTower with algo-trading functions can be considered as an example of high-quality development of functionality and UI/UX-design. The DOM (“glass”) panel has histograms, stop loss and take profit settings, charts with indicators for market analysis. The ability to customize panels in templates, cluster evaluation on footprints with sellers and buyers, histograms of volume profiles to clarify support and resistance allow you to form trading strategies. Heatmap trading, replays for testing (backtesting) provide modeling and validation of assumptions. Once an idea is confirmed, traders can set up autoplay of earnings models.
Built-in indicator and trading risk blocker
Flexible risk management system is a key area of management and monitoring of trading. Setting up the loss indicator and the service of blocking dangerous trades in the console is done individually, after evaluating each trading position. Let's assume that a novice trader has $2500 worth of assets intended for practicing a certain strategy - “bearish” or “bullish” - for 30 days. Based on this, the daily losses are not higher than $83, taking into account the average daily profits. How it will look visually - in the chart below.
Days
Capital $2500. Utilization period - 30 days. Risk factors - losses up to $83 per day
I decade
II decade
III decade
1
120
-180
425
2
-80
-215
-257
3
-200
306
-188
4
180
-486
-125
5
30
512
-250
6
-220
-189
607
7
65
-196
-175
8
94
59
354
9
-54
78
-202
10
318
195
-525
Total:
+253
-116
-336
For the I decade the trader received income of $253, in the II and III decades respectively there were losses of $116 and $336. Total costs for a month of testing reached $199 or amounted to 7.96% of the initial capital. The trader still has a reserve of $2301, which allows him to conduct financial experiments on other models and ideas. But when evaluating transactions and actions, it is found that 11 losses were prevented on trading positions ranging from $500 to $1450, which were beyond the loss limit and could have completely nullified the capital in the first or the second decade.
Detailed consideration of financial loss situations is done after exporting reports to Excel or Google Sheet, pushing CSV files to a MySQL or pandas database written in Python. Subsequent application of cluster chart and heat map, transaction efficiency and order flow by time periods become the basis for algorithm development, simulation and backtesting. As role models, the Merehead team periodically selects winners in various industries of Benzinga Fintech competitions - executives and developers, successful startups with analysts - to add individuality and conciseness to each software development.
Rent, approbation and redemption of unique software with CRM
Merehead, in addition to developing prop trading platforms of several levels of complexity (the minimum price of a project with basic functions is $20 thousand), provides platforms with a customized CRM for rent and for subsequent purchase. It includes broker and trader offices with aggregation and automatic status assignment, partner functionality and tools for copy trading. Fast verification upon registration, multiple deposit and withdrawal options with commission calculation, implementation of a multi-wallet for interaction with several blockchains for cryptocurrency trading, transaction and deposit control - a short list of implemented and tested practices.
This list includes back office admin functions - setting up and connecting API with accounts, integration and team management, two-level sub-IB tree, regular generation and sending of reports to Excel, analytical module with history, comparison of plans and achievements, deposit actions. Swap-free accounts are automatically connected for Muslims. In the sales module traders can plan and transfer, change tasks, prioritize and secondary, interact. Sales analytics, dashboard charts, % of trades are connected for this purpose: data is archived after use. UTM tags embedded in customer offers - opportunity to offer bonuses to prospective leads.
Futures are designed to extend CFD trading in commodity positions and indices: in case of a decrease in liquidity at expiration, positions are rolled over to another contract. The rollover chart is formed with the adjustment reflected in the swap contract in the gap cells. Adjustment of balances is carried out when calculating ratios of investment and equity capital ratio, growth of fixed assets when attracting clients and decrease when withdrawal of funds takes place. Orders and trades are placed in a hedged account, the balance of which is displayed with charts and graphs including gains and losses. Built-in trading robots and advisors, plug-ins are integrated into additional applications.
Realization of business goals in proprietary trading is impossible without software that performs digital transformation, exchange of ideas and norms, concepts and assumptions in the context of fintech services for a specific target audience, including B2B customers. Merehead develops software for prop trading platforms and specialized software for CRM, taking into account business strategies and required functionality. The development process is not a mechanical assembly of solutions and options based on the principle of combining suitable program modules, but a creative elaboration based on examples of solutions of profitable firms and protection against risks (subsidence or slippage of asset and cryptocurrency rates). Besides turnkey development, there are offers to rent software with subsequent buyout at will.