A German proprietary trading firm, Funded Unicorn, filed for bankruptcy, shaking the prop trading community and raising deeper questions about the sustainability of certain risk models.
Unique A-Book Strategy
According to a blog by proptraders, unlike most prop trading firms that rely on challenge fees and operate largely on a simulated trading basis, Funded Unicorn used what’s known as an “A-book” model. The firm mirrored every trade made by its funded traders on the actual market.
In the A-Book model, a firm acts as the counterparty to trades, ensuring a smooth flow of transactions without significant slippage. On the other hand, a B-book model is a practice where instead of passing client orders to the external market or liquidity providers (A-booking), a company internalize these trades.
More about A-Book and B-Book Strategies: To A-Book or B-Book: The Review of the Two Decades
As of now, Funded Unicorn has reportedly not announced any recovery plans or future restructuring. Clients are now left with questions and an example of what can go wrong when ideals meet the unforgiving realities of financial markets.
Expect ongoing updates as this story evolves.
This article was written by Jared Kirui at www.financemagnates.com.Retail FXRead More
You might also be interested in reading Here’s the major earnings before the open tomorrow.