**Retail Prop Trading Not a Priority for ESMA, Says CySEC Chairman**
In a recent statement, George Theocharides, chairman of the Cyprus Securities and Exchange Commission (CySEC) and head of the European Securities and Markets Authority’s (ESMA) risk standing committee, indicated that retail proprietary trading is not currently among ESMA's immediate regulatory priorities. This announcement comes despite the sector's notable global expansion and growing interest from traders.
Speaking to Finance Magnates, Theocharides noted that there are no significant discussions underway regarding the regulation of the retail prop trading industry. "To the best of my knowledge, ESMA is not currently engaged in any substantive discussions regarding retail prop trading," he stated. This marks a shift from the heightened regulatory focus seen over the past two years, particularly as retail prop trading gained traction in financial discussions in Paris.
Just a year ago, Theocharides had described retail prop trading as being "on the radar" of regulators, suggesting that it could potentially fall under the purview of the Markets in Financial Instruments Directive II (MiFID II). However, he now emphasizes that the issue has moved down the list of priorities for ESMA. "While the topic may be monitored as part of broader market developments, it does not appear to rank among the Authority’s immediate priorities, given the relatively limited size of the sector," he explained.
Despite the lack of regulatory momentum from ESMA, the retail prop trading market has shown robust growth, particularly among younger traders who are attracted to the opportunity to trade with larger pools of capital while minimizing personal financial risk. Google Trends data reveals a significant increase in search interest for retail prop trading, especially in countries like Germany, where searches for "prop firm" surged by over 1,050% and peaked in February 2026.
The growth of the sector is further highlighted by the inclusion of companies such as Funding Pips and FundedNext in Deloitte’s 2026 Fast 50 ranking for the Middle East and Cyprus. However, the business model of many retail prop trading firms remains legally ambiguous, as numerous companies present themselves as educational or simulation platforms rather than regulated financial institutions. This distinction is becoming increasingly blurred as more prop firms either acquire brokerage operations or establish regulated trading businesses alongside their existing activities. Notable examples include acquisitions and new brokerage launches by firms like FTMO, The Trading Pit, Axi, and ATFX.
The landscape of retail prop trading has also been affected by significant changes in the industry. Following MetaQuotes' withdrawal of access to MT4 and MT5 licenses for prop firms in 2024, many companies were compelled to migrate to alternative platforms or secure brokerage licenses. This upheaval led to the closure of approximately 100 prop firms between early 2024 and late 2025, accounting for nearly 14% of the market.
Industry data suggests that the success rate for traders purchasing a trading challenge remains low, with only about 7% ultimately receiving a payout. This statistic indicates that many firms rely heavily on the continual inflow of evaluation fees from unsuccessful participants to sustain their business model.
While the European regulatory landscape appears to be taking a cautious approach, developments in the United States suggest a more rapid evolution. Several major American prop firms are seeking registration with the Commodity Futures Trading Commission (CFTC) following enforcement actions against companies like My Forex Funds in 2023. This indicates that regulatory scrutiny in the U.S. may be increasing, contrasting with the current stance of European regulators.
Theocharides' comments suggest that retail prop trading will remain under observation rather than undergoing active regulatory review in Europe for the time being. However, he acknowledged that continued market growth or a significant industry scandal could prompt a reevaluation of the issue, potentially bringing it back onto ESMA's agenda in the future.
As the retail prop trading sector continues to evolve, stakeholders will be watching closely to see how regulatory attitudes shift in response to market dynamics and emerging challenges. For now, the focus remains on monitoring the sector's growth and its implications for traders and regulatory frameworks alike.