Quote from hilojack:
Has to do with the lack of commissions they generate for themselves and the perceived higher risk. Not to mention that most prop firm owners don't know anything about them.
Now that most of the simple answers have been covered off let me add these points. The reason 'true prop firms' (those that back their traders 100% and don't make $ on commission markups), have an aversion to trading futures is much more sophisticated. Here are a few reasons:
1. Bringing traders through the learning curve is intensely expensive. The scaling factor is just not there. Do u trade 1 contract or 2 , or 3 , see the problem.
2. The 'edges' in trading futs are just not there. The futs mkts, liquid ones anyways, tend to be incredibly efficient and hence very hard to exploit mkt inefficiencies and gain an edge.
3. The ability for a trader to offset or minimize his costs through adding liquidity to the mkt is absent. This is a part of point 1.
4. Concentration of risk. There are not as many futs contracts (especially liquid ones) as there are equities. Hence if you have a sizable floor, you will often be concentrating risk when most of the traders are trading the same contract.
5. There are many equity products that can and do replicate the performance of futures contracts. These products offer cost advantages over the futs contracts. These equities can (ie. SPY, DIA, IWM, USO, GLD, etc) also be combined with other equities to hedge and or create other strategies simultaneously.
These are just a few of the 'other' answers to the OP question rather than just dismissing the reason as "prop firms can't make commissions off futs trades" response.
