Prop Number One is committed to a fair and transparent trading environment, enforcing strict rules to prevent abuse and unethical practices.
Similar to the copy trading provisions, hedge trading is also subject to specific controls that ensure that trades are conducted independently and in accordance with platform standards.
Background and Objectives
Hedge trading, understood as a strategy to hedge positions in order to mitigate risk, can become problematic if used fraudulently to manipulate trading results.
For this reason, Prop Number One has defined a set of verification criteria aimed at identifying possible anomalies and ensuring that each trade reflects its trading style. These rules are designed to prevent suspicious transactions and ensure the integrity of the entire system.
The Verification Criteria of Hedge Trading
The inspection procedure is based on the examination of three basic elements:
Instrument: The financial instrument must be exactly the same. For example, EURUSD and EURUSD.ecn are considered identical, although the “.ecn” suffix varies.
Opposite Side (Buy or Sell): The direction of the trade must be opposite. If a position is a buy (Buy), the opposing side must be a sell (Sell).
Open Time and Close Time: The opening and closing time of trades must be within a maximum range of 1 minute. In other words, all open trades on that instrument and with that direction within a similar time frame are examined.
Control Mechanism and Sanctions
To detect possible violations, Prop Number One adopts an automated reporting system that:
Identifies trades that mirror those of other traders.
If reported, the affected account is manually reviewed.
If a violation is confirmed during the inspection:
Prop Number One reserves the right to terminate all associated accounts immediately.
Traders could receive a formal warning or face immediate platform closure, depending on the severity of the case.
What happens if I am alerted to hedge trading?
You can review the parameters and consequences of the violation in detail at this link: https://faq.propnumberone.com/en/articles/10624542-hedge-trading-risk-controls
Implications and Benefits
Through this verification procedure, Prop Number One aims to:
Prevent Abuse: Prevent hedge trading from being used to hedge against trades in a fraudulent manner.
Ensure Transparency: Ensure that each trade is executed independently and consistently, respecting one's trading style.
Maintain Platform Integrity: Create a healthy and competitive trading environment where every trader operates under clear and shared rules.
Conclusions
Prop Number One's hedge trading rules are a key tool for maintaining a fair and transparent market.
Control based on instruments, opposite directions, and close opening and closing times helps identify any anomalies, protecting both the platform and investors.
By following these strict criteria, every trader can benefit from a safe and regulated environment where competition takes place in a fair and responsible manner.