Regulatory pressure in the European Union reached a new level at the start of 2025, with one law drawing more attention than most. The framework, known as DORA, was designed to bring structure and resilience to the financial sector’s digital backbone. It signaled progress for policymakers. But for many firms, it raised new concerns.

Across desks in London, Amsterdam, and Frankfurt, proprietary trading desks have been watching the fine print closely. For prop firm traders in Europe, this is not just another rulebook. DORA touches systems, vendors, and internal processes in ways that previous rules did not.

As compliance deadlines pass and new reporting demands set in, firms are beginning to ask whether staying put still makes sense.

Pre‑Existing Regulatory Burden: IFR/IFD Hits Prop Traders Hard

The Investment Firms Regulation and Directive (IFR and IFD), phased in from mid-2021 to 2025, imposed bank-style prudential and governance rules on MiFID II investment firms. That includes proprietary trading firms across the EU. Rather than a light touch, it brought heavy capital requirements, K factor reporting, strict governance mandates, and extensive remuneration controls.

These rules have proven uniquely punishing for prop traders. Many firms entered the scope as Class 2 entities, facing capital charges several times higher than the traditional margin under clearing firms. Even simpler firms lacked access to the comparatively lighter Class 3 treatment. As a result, many faced disproportionate requirements.

The financial consequence is clear. A survey by Acuiti (a market intelligence firm covering derivatives and proprietary trading) found that over 60 percent of prop trading executives view IFR and IFD as a serious disadvantage compared to U.S. peers. Many say the capital charges do not match their risk profile. 

Why DORA Became the Final Straw

For many proprietary trading firms in Europe, IFR and IFD already felt excessive. But the Digital Operational Resilience Act, known as DORA, pushed things further. Enforced in January 2025, DORA is a European Union regulation aimed at strengthening the digital and operational resilience of financial entities by setting strict requirements on information and communication technology risk, incident reporting, and third party vendor oversight.

The law applies broadly to trading firms regardless of size or trading volume. It requires firms to maintain a full inventory of external service providers, perform layered risk assessments, update contracts with resilience clauses, and run periodic resilience testing and reporting. Many trading firms now find themselves navigating deep operational audits and legal updates for even routine technology services.

A March 2025 survey conducted by Acuiti in partnership with Avelacom showed the scale of reaction. Eight percent of prop firms had already relocated from the EU. Another twelve percent confirmed they had made the decision to move. Thirty six percent were actively considering relocation, with Dubai and Singapore leading the list of destinations.

Only twenty seven percent of respondents were fully compliant with DORA by the January deadline. Thirty percent reported a sharp increase in operational costs, largely due to vendor management and market data compliance.

Ross Lancaster, head of research at Acuiti, said DORA is not an isolated trigger. It solidified decisions already forming under IFR and IFD. In his view, the cumulative weight of regulation now threatens European capital markets with reduced liquidity and slower innovation.

Broader DORA Compliance Challenges in 2025

Half a year after DORA came into effect, most firms in the EU are still not where they need to be. The law is active, but for many desks, compliance is still an ongoing process. Teams are reviewing systems, chasing down vendor documentation, and trying to build risk frameworks that actually meet the standard.

The biggest problem is vendor risk. Firms know who they’re working with, but they don’t always have the visibility DORA demands. A lot of third party contracts were never written with these kinds of checks in mind. Some firms are still trying to figure out who qualifies as critical. Others are waiting on vendors who are also playing catch up.

The pressure on internal teams is real. Security leads are stretched. Compliance teams are building out policies from scratch. Some firms are automating pieces of the process. Others are still stuck trying to get basic testing and incident reporting in place.

Part of the issue is also timing. The final technical standards didn’t land until just before the deadline. That didn’t leave much room to plan, especially for firms with leaner ops setups.

Larger players are rolling out structured programs in phases. Smaller firms are still figuring out if they need to build or buy. Either way, DORA is not something firms can treat as a one-time checklist. It’s a shift in how risk is handled, and it’s not going away.

Final Thoughts

DORA has changed the equation for prop trading firms in Europe. Layered on top of existing rules, it has forced firms to reassess their future in the region. Some have already left. Others are preparing to. What was once a competitive and fast moving market now faces slower execution, rising costs, and reduced participation. If the trend continues, Europe will not just lose traders. It will lose the liquidity and market depth that made it relevant in the first place.