The proprietary trading industry is currently divided over the concept of “gamification,” following concerns raised by Italy’s financial markets regulator, Consob, which likened some prop trading practices to “video games.”
One industry executive rejected the comparison, stating, “I don’t think the ‘video game’ label fits,” while another found Consob’s caution “appropriate and timely.”
Prop Trading and Gamification: A Controversial Topic
David Varga, Co-Founder of Fintokei and Purple Trading, commented on the issue, saying, “I think gamification can be beneficial if applied with good intentions.” Varga sees value in the educational potential of gamification, using apps like Duolingo as an analogy. He emphasized that many modern proprietary trading platforms are simply following broader societal trends.
Last month, Consob raised concerns about prop trading firms, warning that some may simulate financial trading through what resembles an online game. These platforms, according to Consob, mimic trading environments where users pass skill tests and aim to make a profit. The regulator also expressed concerns over deceptive practices associated with these simulations, a stance aligned with other European financial watchdogs.
James Glyde, CEO of prop trading platform PipFarm, supported the regulator’s stance, stating that the warning was “necessary and timely.” He emphasized the risks to consumers due to unethical practices in the industry.
Gamification: A Double-Edged Sword
The debate surrounding gamification in trading stems from the idea that trading, traditionally considered a serious financial activity, should not be trivialized. However, proponents of gamification, such as Trent Hoerr, CEO of BullRush, argue that gamification, if done responsibly, can enhance learning. “Many industries, especially education, have embraced gamification to improve the learning process,” Hoerr noted.
While Varga acknowledged potential risks raised by regulators, he reiterated that gamification is part of a larger societal shift. He pointed out that many prop trading firms originally aimed to improve traders’ skills, discipline, and consistency. “The flashy, game-like marketing may have overshadowed this, but it remains a core value,” Varga stated.
Growing Regulatory Scrutiny of Prop Trading
Consob’s concerns are not isolated. Financial regulators across Europe, including Belgium’s FSMA and Spain’s CNMV, have issued similar warnings about the rise of prop trading firms, which allow users to engage in trading simulations without risking their own capital.
The European Securities and Markets Authority (ESMA) has also entered discussions about regulating prop trading firms, signaling an effort to create a legal framework for the growing industry. While the Czech National Bank suggested some firms may require MiFID compliance, it’s clear that the regulatory landscape for prop trading is evolving.
The Future of Gamification in Trading
Despite the warnings, many forex and CFD brokers continue to explore prop trading. For instance, Trade.com has launched its own prop trading service, Trade.com Challenges. CEO Roei Gavish emphasized the importance of adhering to financial regulations while developing innovative trading solutions.
Stathis Xenos, an entrepreneur with experience in fintech and prop trading, added that gamification taps into users’ natural desire for competition and achievement. However, he cautioned that the excitement generated by rewards and challenges could lead traders to take excessive risks. “Gamification is a powerful tool, but it needs to be implemented thoughtfully,” Xenos said, stressing the balance between engagement and responsibility.
While gamification offers a fresh approach to trading, the debate between its potential benefits and risks continues to divide the industry.
