Regulation Pushing Prop Firms Out of Europe: Survey

“Unsustainable” regulatory burdens are likely to accelerate an exodus of proprietary trading firms from the European Union, with the Digital Operation Resilience Act (DORA) firmly in the spotlight.

A quarterly survey taken by Acuiti, in partnership with Avelacom, from its prop trading network finds that 8% of firms have actually moved, while 12% have made the decision to move out of the EU. A further 36% were considering such a move, with Dubai and Singapore being the favoured destinations, Acuiti says.

DORA is the latest in a “substantial increase of regulatory burdens”, the survey says, with DORA being “the final straw”. DORA directs that all MiFID II regulated firms are required to put into place extensive frameworks for monitoring third-party vendor relationships. Acuiti says this comes on top of a “punitive” capital regime introduced in Europe for prop trading firms in the form of IFR/IFD, which entered into force in 2021 and is being implemented in phases.

The survey finds that just 27% of surveyed firms were fully compliant on the implementation date for DORA, which was mid-January 2025, and clearly there are concerns about the cost of implementation in spite of the business risk from third-party failures. Costs are under pressure at prop firms, according to the survey, 30% reported a “significant” increase in costs, largely thanks to exchange and market data fees. In spite of that, Acuiti says 2024 was another strong year for the segment, with volatility in Q4 boosting annual revenues.

“The sheer number of proprietary trading firms looking to relocate outside Europe is a significant concern,” says Ross Lancaster, head of research at Acuiti. “The departures will inevitably reduce liquidity and lower the competitiveness of European capital markets.”