The FSMA warns consumers against shadow investment games.

The FSMA (Financial Services and Markets Authority) has issued a cautionary alert to the public regarding the operations of prop trading firms. These entities engage in proprietary trading, allowing individuals to participate in simulated investment activities across various financial products like shares, bonds, commodities, cryptocurrencies, CFDs, and forex, without utilizing their capital.

Before gaining access to these trading platforms, consumers are required to undergo rigorous and often costly training courses. Many individuals may find themselves investing significant time and money in multiple courses before being deemed eligible to participate. However, there's no guarantee of success, and some may never meet the required standards, leading to financial gain for the prop trading firms.

Upon completing the training, participants receive a 'certificate,' essentially a diploma issued by the firm, granting them access to the simulated trading environment. Here, individuals engage in shadow investment games, operating solely on demo accounts provided by the prop trading firm. In some cases, the firm may execute demo transactions on real trading platforms, with any resulting profits potentially earning the participant a commission.

Critically, the prop trading firm retains sole discretion over platform access and the selection of simulated transactions, making it challenging for participants to ascertain their entitlements or potential earnings. Consequently, individuals may invest considerable time and effort without receiving adequate compensation.

There has been a noticeable surge in advertisements for prop trading firms across social media platforms, accompanied by the emergence of websites offering paid courses to assist individuals in meeting these firms' eligibility requirements. Additionally, these firms often promote trading in complex financial instruments like CFDs and forex-products, which carry high levels of risk and frequently result in total investment loss.

Given these concerns, the FSMA urges the public to exercise caution when dealing with prop trading firms and associated entities. It advises against engaging in activities that may lead to financial loss and warns against the proliferation of firms offering services related to prop trading, such as training courses and trading software.