Thks for that, it must have been an interesting documentary, I wish I could have seen it.
It is clear that they do make a lot of money from failed attempts, we see that all the time with ordinary brokers quoting failure rates of around 80% - and that is only the regulated brokers with restricted leverage.
However, these fees are not huge and, intuitively, it is hard to imagine that they can make such large and constant income just from these fees net of payouts.
On the other hand, I can see a big difference between the operating model of a normal broker and a prop firm:
-
The broker puts your funds into a segregated account - and then lets you lose it slowly until it is all used up. But he only gets to gradually keep your money as you lose it.
-
The prop firm charges you a fee instead and keeps it immediately when you pay it - and then gives you the opportunity to try and earn it back…
But it just seems so absurd that so many businesses could survive and thrive on such a shaky business model that only survives from a massive and constant flow of new accts. 
But then my own history is in banking and risk assessment so maybe I have a different, more cautious, attitude towards business set-ups! 
I find this a bit difficult to understand. I remember in the early days of these prop firms there really was an almost impossible trading environment because they had a time limit within which one had to reach the target - and it was tight if one traded conservatively. It definitely encourage rash positioning - and the inevitable failures.
But nowadays there are no time limits and so the only pressure is one’s own impatience to get into the “big money”!
There are commissions and swap fees but these are not huge and, on the other hand, there are restrictions on trading high volatility events which prevent some rash trades hoping to pass quickly - but that is only an advantage for conservative traders.
One area that does seem to be misleading is the leverage. Although it is described as low, it is based on the acct nominal amount and not the max draw down. So a low leverage applied to a nominal $100,000 is actually very high when applied to the max drawdown of, say, around $10000?
In the same way, they “promote” a cautious risk management of 1%-2% max exposure. But, again, it seems to me that this is applied to the nominal $100 000 (i.e. $1000-2000). But if one applies that sum against the max drawdown, it is a horrendous risk per trade!
But, surely, these are trader risks? And any trader with any experience knows full-well what the real levels of risk should be. You just take the account size as being the max drawdown, say, $10000, ignore the nominal amt, and trade it as any other normal acct up to the target of, say, $10000?
What other restrictions are there that would inevitably kick out even an experienced trader who has already reached funding, recovered their fees, and making profits?
I guess one could consider that suspicious in today’s world of transparency - but, on the other hand, how far need a company go in revealing their business operations? I have never seen their business accts but I would have at least hoped to see there some kind of entries referring to trading profits on their own account!!
Do you mean because CFD prop firms are more risky as a company than a futures firm or from the traders’ POV in succeeding to get funded?
One theoretical advantage with a prop firm is that your own capital is not involved and therefore not at risk in the event of a company collapse. The max risk is the amt of due-but-unpaid profit share. Bad, but not as bad, as losing your capital…
Interesting points @chesterjohn, thanks! 
