Prop Firm vs Quant Firm
Institutional prop firms, quant hedge funds and retail "funded" prop firms all get called prop firms. Here is how they actually differ.
Last reviewed on October 4, 2026
Short answer
"Prop firm" is now used for two very different businesses. An institutional proprietary trading firm trades its own capital with salaried employees — Jane Street, Optiver or Jump Trading. A retail funded ("prop") firm sells evaluation challenges to independent traders and pays a share of profits to those who pass — FTMO, FundedNext or Topstep. Quantitative describes a method (systematic, model-driven trading) that cuts across both, and also covers hedge funds that manage outside money.
The four kinds of firm in this directory
| Type | Whose money | How you join | How traders are paid | Examples |
|---|---|---|---|---|
| Institutional prop / market maker | The firm's own capital | Job application and interviews | Salary plus discretionary bonus | Jane Street, Optiver, IMC, SIG, Hudson River Trading |
| Quant hedge fund / systematic manager | Outside investors' money (plus partners') | Job application and interviews | Salary plus bonus | Two Sigma, D. E. Shaw, AQR, Renaissance, Qube |
| Equity "arcade" prop desk | Firm capital, often with a trader deposit or risk capital | Application; sometimes training fees or a capital contribution | Profit share | T3 Trading Group, Kershner Trading, Great Point Capital |
| Retail funded / evaluation firm | Mostly simulated accounts; firm capital in some live programs | Buy an evaluation and pass its rules | Share of (often simulated) profit, typically 80–90% | FTMO, FundingPips, The5ers, Topstep, Apex |
The directory tags the first three groups as Quant / institutional and splits the fourth into Funded (forex/CFD) and Futures. Hedge funds are included because people searching for "quant firms" usually mean them too — but strictly speaking they are not proprietary traders.
Why the distinction matters
- Regulation. Institutional prop firms and market makers are usually authorised firms or exchange members (for example registered broker-dealers in the US or MiFID investment firms in the EU). Most retail evaluation firms are not regulated as financial firms at all — see are prop firms regulated?
- Who carries the risk. At an institutional firm, the firm absorbs trading losses. At an evaluation firm, the trader's maximum loss is the fee — but so is much of the firm's income, which shapes its incentives. See evaluation models.
- Career path. Quant firms recruit mainly from mathematics, physics, computer science and engineering programs, through interviews heavy on probability and coding. Retail firms accept anyone who pays and passes.
- Taxes. Employees are taxed on wages; retail funded traders are usually taxed as self-employed on payouts — see taxes for funded traders.
Common questions
Are proprietary trading firms and quantitative trading firms the same thing?
No. A proprietary trading firm is defined by whose money it trades: its own. A quantitative firm is defined by how it trades: with mathematical models and automation. Many firms are both (Jane Street, Optiver, Jump Trading), but some quant firms are hedge funds that manage outside money (Two Sigma, AQR), and many prop firms trade discretionarily.
Are retail 'prop firms' like FTMO real proprietary trading firms?
They use the name, but the model is different. Retail funded firms sell evaluations; traders who pass usually trade simulated or demo-funded accounts and receive a share of the simulated profit. The firm's revenue comes largely from evaluation fees rather than from trading its own capital in the market.
Do quant firms charge a fee to join?
No. Institutional quant and market-making firms hire through interviews and pay salary plus bonus. Any program that asks you to pay to trade is a retail evaluation model, not institutional employment.
What is an institutional prop firm?
An institutional prop firm is a regulated trading company that trades its own balance sheet with employees, typically as a market maker or arbitrage trader, and is often a member of the exchanges it trades on. The term is used to distinguish such firms from retail evaluation businesses.