Louis Régis on why Propr built transparent onchain prop trading

0:00I'm Ashton Addison from the Crypto Coin Show, and today on Blockchain Interviews, we have Louis Regis, founder of Proper. Louis, welcome to the show. Thanks for taking the time. >> Uh thanks for having me. It's great to be here. >> Yeah, excited to dive into prop trading. This is a 10 billion plus dollar industry in traditional finance, and props are making their way into crypto,

0:22but I feel like it should be bigger than it is right now, and there's a lot of opportunities in this part of the market, especially moving in traditional assets into on on chain that teams are capturing. I know Proper has had a great start at capturing part of this market onto the blockchain, and I'm excited to dive into that today. >> Yeah, no, it's true. Like

0:45especially as you see the growth of real world assets on chain, you know, we believe that prop trading is going to go more and more on chain and and capture more of that 10 billion market, but it'll also expand this further, and we'll discuss about this, but additions of new markets, like pretty market, which we are really excited about. >> Definitely. And why do you think that

1:08now is the right time for prop trading to be expanding on chain, and and why it hasn't done it in the past few years already? >> I think the breakthrough is liquidity that's for retail traders very close to on par to trade five venues. Today, you can trade the NQ like Nasdaq as in on hyper liquids or other platforms like lighter, and the spread that you'll get

1:36and and the feels and just the execution quality will be similar to trade five. And that's the building block on on top of which Proper is building upon, and and it was like the only constraint we have, for example, if you look back at DYDX or GMX, was liquidity constraints. It was just simply not there. Plus, we have the explosion of real-world assets

2:01uh like tokenized stocks, um pre-IPO stocks, too, um which are very novel uh to the market. It's It's only then that it's now relevant to do prop trading on on top of these assets. >> Mhm. Yeah, liquidity has always been an issue even in, you know, the top crypto assets, never mind tokenized stocks and real-world assets. That's like, you know, very small liquidity even in

2:27comparison to to Bitcoin, which you would say is small liquidity in comparison to the traditional markets. >> Um yes, but like the like for for prop firms in general, you're looking at retail investors, and on like any given asset, like a million spot order is not going to have an insane slippage. And then it's up to us to gauge the experience to allow for

2:52those great liquidity conditions. So, for example, on Proper, we have uh restrictions on the assets that we list to only list the ones that are uh liquid enough. >> Mhm. >> Uh but it's only increasing. Thing with Clarity Act, for example, we'll have um more facilitators of market market makers. And what we see in the perp decks world, too, is um Osjam, for example, is doing this where

3:16you uh well, if our rationale, too, is they bridge liquidity over from TradFi to to crypto. So, we're we're only getting um more optimistic about the like the arbitrage and liquidity between the two worlds. >> Mhm. Definitely. You've been blunt in the past about the limitations in in prop in the prop trading industry traditionally. Uh you know, if you are

3:41winning a lot, it's possible that the the market makers or the platform can see what you're doing, and and may turn the odds against you. Is that a a still a thing in traditional prop trading and does that translate over to these decentralized networks which could be on transparent blockchains? >> Yeah, at the end of the day it's about the economics of the firm and if a firm

4:06is denying payouts, for example, so as a prop firm you um deploy trades of traders and if they win you have to pay them. Uh and that's either coming from your profit as a firm too or you neutralize them in which case it's a loss. So it's about the balance between the rule set that you have and the economics of the firm. If you have rules are too loose

4:32um then economically it's not good for you. Um especially if you don't practice good risk management. And this facet of prop trading will still occur on chain and we actually see it on quite a lot of um on chain counterparts as they do not have sound economics nor do they practice good risk management. So since the issue to me is more about um

5:00building economically sound businesses, whether you're building in TradFi or on chain the issue is will persist. The good thing about transparency and being on chain is you see in real time the economics of the firm. Uh a very simple metric is um the payouts to revenue ratio. Obviously if you have more payouts than revenue you can expect that in the medium term

5:26it's not sustainable. Um you'll essentially like run out of money unless you hedge very very appropriately, but again it's something that you can verify on on on chain prop firms. >> Mhm. I'd love to dive into the on chain transparency a little further. It sounds like you can get some great metrics out of it to understand a high level on the businesses.

5:50But, is there also so much transparency that it can show, you know, the trade secrets or, you know, the strategies and all of the holdings? And does that limit these prop trading firms versus what they had in traditional? And maybe that's why they aren't here in in full. >> No, I think I think I mean first is I'm only convinced that they will those firms will come through on chain

6:17because customers will demand more trust between them and and the infrastructure. And this is what on chain offers. Um Now, when you're operating on chain, as I said, like you you're a lot more credible because for example, now on proper, you can audit that the firm is profitable and as such will be there in the medium term and long

6:45term. And if you see any changes in the economics, uh then you can argue whether our model is sustainable or not. And for example, you discuss about the positions of the firm, uh for us, those positions are available on chain. So, anyone can actually see the margin that we have to deploy to our traders. And and that's something that no other firm, actually, I think we're

7:11the only ones who have this level of transparency and that exactly what hyperliquid um or all other like perp decks is not like a hyperliquid maxi, but like the other um perp decks is give you that transparency and and verifiability, which put traders at at at very much at ease. >> Mhm, definitely. You know, I've had a lot of discussions in the past

7:39month, even in very recent, where a lot of these firms, other trading platforms, exchanges, wallets even, are all integrating hyper liquid. Can you talk about that integration and moving on hyper liquid? And is it just the liquidity or what's the reason that that proper is fully integrated there? >> Yeah, it's it's all a function of liquidity. Hyper liquid is actually very expensive

8:03as a trader. But because the the spread and the depth is just so much greater as opposed to other venues, um that hyper liquid makes sense. Not in the C4 BTC, like BTC on lighter, for example, by even spread and fees is more efficient. But if you look at the newer assets and especially real world assets, they're a lot more liquid. And for us, when you run a book, what

8:30you what you have to consider is liquidity on top like a beyond anything else. Especially as we captured a lot of the open interest on these markets, is when we need to enter or to um exit a position, we are pretty much price I guess as far as fees are concerned, we are incentive to to that. Because for us, what matters is the exposure that we have at any given time.

8:56Now, I think those fees will compress over time, especially as competition grows. Um and you see it with RFQs uh from the rational. It's a what new way of um filling an order essentially uh instead of centralized order books. And but but like what I'm trying to get to is we'll expand out of hyper liquid um to basically give the best experience to

9:25our traders and that's the only thing we care about. And the only experience that I think matters to us is liquidity. So, on a 1 million to 10 million order, what's my slippage on any given asset? And um today we actually hedge on both uh lighter and hyperliquid. >> Mhm. >> And we go wherever the execution is best. So we we don't really care about the end

9:49venue. >> Yeah. I think lighter is is less well known, but I did just see a huge surge in their their valuation and their their growth just because of this part of the market seems like you and your team are in like a highly exploding part of the scene right now. >> Yeah, and I think it's it's it's a function of liquidity

10:17and and when when you're assessing it's just like we saw those debate around cryptocurrencies and you have like the cashbacks and the fees, the FX rates. And I think as those infrastructure become fairly on par, we'll start to assess those on the depth of the markets. And for example, on I think on a 1 million loan on lighter, if you factor in the

10:47the spreads, you would get to a cost of about $400. >> Mhm. >> And the cost is purely from the spread because you do not like the slippage because you do not have fees. And on hyperliquid with amounts to about 700. And so I think especially retail investors and if you're doing a lot of intraday trading and fees matter to you, then you'll move over there. And so to me you'll have two

11:13different cohorts, the ones that have a smaller wallets that go to on lighter and the ones that have much larger wallets, you know, we're talking about like over a million in AUM, they would go to hyperliquid cuz it's going to make a lot more sense for them, but I see lighter and Robin and and hyperliquid just coexist. And I think they serve a very different

11:39uh cohort of perps trader. >> Mhm. Definitely. Well, I I think it's a very smart integration and uh it's continuing to to grow uh in all aspects of of crypto and moving into real-world assets and traditional assets, which I think is important because at least in the last couple months, I've seen equities and tokenized equities just skyrocketing through the SpaceX IPO and

12:05AI stocks uh and with crypto sort of consolidating and boring uh and you know, traders are looking for that volatility. >> Um yeah, and again, like I think where Hyperliquid is winning today is um they have TradeXYZ, so they're HIP3D player um is very good at uh getting mindshare and whenever they list a ticker,

12:33for example, SpaceX, it would have a lot more uh open interest and and and this is what matters for Hyperliquid today is to constantly have um growing market share, but I actually don't think this is going to persist. I I I think um there are a lot of venues that are being built to just do like what DEXs uh like uh LlamaSwap or CurveSwap, where you can

13:00route to different DEXs. And I do think that uh you'll have the same in perps coming very soon. Mhm. Um so, we'll value perps DEXs based on solid execution execution quality, just like we view um AMMs today and just DEXs. Uh such that we'll route the volume where it's most efficient, and I think Later is going to win. Um but on on certain securities where

13:26you've mentioned volatility, and that's key there because when you chase volatility you're not really sensitive to the price. Um I mean not I mean to the fees and to the like the execution cost because you want to get filled at any price. Um and so there like if you have volatility and new assets, hyper liquid is winning today, but it's going to be competition is overall

13:50very good for us. We want to get the maximum amount of commission because we usually what happens there is the quality of execution for the end user is only increasing. So you'll have less fees, you'll have more liquidity, which is exactly what we need uh to grow us as a firm. And we'll maybe uh see it later, but liquidity is still like is also a constraint for us um

14:14even at at our small size today. >> Definitely. Now, competition is good and lower fees is always nice. Um I want to hear more about the uh the integration with Polymarket as well. I'm not sure if that is live yet, but you know, it's Polymarket's been all over because of the the World Cup and other people speculating and there's different types of traders

14:38uh that maybe there's an overlap with the the prop trading as well, but the predictions uh are still going strong and a lot of on chain platforms are also connecting into there. So what's the what's the story with Proper and Polymarket? >> What we want to do in our tagline is um get funded uh trade anything is anything that's tradeable on chain we want to

15:03offer prop trading infrastructure. And Polymarket has been a very growing segments. And it's something we as a firm we have firm conviction that this will grow uh in in market share in in terms of volume traded on chain and as such a lot of our traders ask for integration. And so we

15:30we're actually like a single digit days away from launching on on Polymarkets. Um if we release this on on a Monday next week, we'll probably have this within the same week, too. And it's over all like wherever you have trading flows, you have the ability to do prop trading. And uh that's where we specialize in. So that means that very early on on the on

15:56we had to figure out risk management frameworks for Polymarket, which is actually a lot harder than uh than perps on hyper liquid. >> Yeah. No, it it it sounds that there's a lot of rules and and uh and different constraints potentially. I I feel like in Polymarket and people I'm seeing people that are not agreeing with the

16:23rules or maybe they're not as clear. You know, people are are are even trying to sue saying, you know, interpreting whether they should have won the trade or not. >> Yeah. Yeah, we will uh I mean there's UMA discussions. So how do you resolve the markets? It's um it's At the end of the day, it represents a very minor amount of flows on on Polymarkets, but you hear about them

16:49very often cuz a wide majority minority, sorry, of Polymarket traders are very vocal about those. And at the end of the day, it's about resolving markets and there is no good or or wrong answer. These guys have scaled tremendously fast. I think they know they have to improve their UMA and but we will inherit this um issue, too, because if Polymarket does not resolve

17:15the markets, I don't think we'll have the authority to say pre-market is wrong. And so forth as well we'll do one-to-one mirroring of pre-market's decision. >> Yeah. >> We know they're working on on on their resolution and eventually have like even trustless amounts to resolution. So we know this will improve. But it's also

17:42what happens when you're early into the markets. But these are not pre-market team and Kalshi team too. They're very capable. So we know that they'll they'll figure this out. >> Definitely. Yeah, I'm sure there's tons of successful traders. But you only hear about you know the people that leave reviews are the ones that had a bad experience and that's why

18:02you see these these uh arguments. And people that won they're like they're silent. Um you know I want also jump into artificial intelligence and how that might play a role in prop trading as well as AI agents trading on your behalf. I've seen this started on on proper where there's a few hundred AI agents that are trading. Can you tell me how that's going?

18:29>> Yeah, I think when we first built proper we actually did not build proper for on chain. I think on chain is one USB, sure. But my view is that every firm will move on chain. So you have to really be different. And the thing that we really believe in is that if if there is a product market fit which there's clearly on a 10 billion market for prop trading. Today it's only

18:56applicable to traders like human traders. There's no API access to any prop firm out there. The main reason is run risk managements and risk controls which we spent a lot of time on. And so today anyone any trader, any agent can tap into a funded layer. So, they can get access to funded capital and trade programmatically. Which is a very novel innovation in the

19:25space because historically, no you cannot interface with an API. It would have to be through a a user interface. And and that's actually been the very like what's grown the most within within our firm at a at a acquisition at a an acquisition sorry, acquisition cost that's very small. And what we see is is actually much greater fit on AI agent trading as

19:55opposed to human trading. The reason is pretty simple. For for our firm, if you want to have access to a 100K of capital, you have to pay about a thousand. It goes from like 500 to a thousand depending on the rule set. And you can actually So, basically for as low as a 500, you can expose you can get exposure to 100K of capital. And when we talk to agent builder,

20:20when you deploy your algo, you don't want to deploy it on 100K of your own capital. You would much rather only have 500K of deposit and then trade with that with that money cuz prop trading essentially gives you um implied leverage. And we see much greater fit there on the bots that are doing more volume. On certain platforms like Nick.ai, we see great conversion, too. Nick.ai is

20:47where you can build uh bots. And so, we we see greater appetite for agents to trade um through [snorts] prop funding as opposed to proprietary funding. >> Very interesting. And do you have an idea of who are the clients behind the AI agents? Is it, you know, the same traders that are trading on the human, but they're deploying other strategies,

21:15or is it developers that have developed, but they're not really traders? >> Cloud and Jamie and I had GPT has democratized building for anyone. Um which means that we cater not to the quant algo traders, but also the retail crowds that they have a test, they've back tested that test is over time, and now they they're deploying those algos.

21:44Or maybe those were technical analysis traders that had an edge in trading the markets and that automate automatized this edge through an agent. So the only mix is is still like the the very amateur like traders that bootstrap their algos through Cloud. We have the very sophisticated players. We also have We actually have small

22:11market makers using our firm to deploy their strategies. Uh and then the last bit is the platforms that are integrating us. We have mentioned Nick.ai, but those are agent platforms that enable you to like for for anyone to build an agent based on certain trading strategies. And I mean, those are really the three types of customers that we have for this

22:42um AI agent side, but we have pretty strong conviction that this is going to be the far majority of our users in the next um 6 month to year. >> Wow. That's really interesting. So, if there are traders, people interested in trading that only use you know these top level LLM's Claude, Gemini can they with the knowledge that they have can they easily

23:10start doing the AI agent trading on proper? >> The integration takes like through Claude it would take you about 10 minutes. So yeah, you can get started really quickly. And we've got a lot of examples. For example, we've had um the CEO of Rockaway X one VC fund that's City Solana that posted on X. Like he he got started with his own bot and he's

23:38been trading on proper since. So it's it's really really easy to get started. Now just like it comes back to the question of how easy it is to make money in the market. The truth is it's really hard and it it's it's still is. Um you can get better at risk management and and do it in a way that does not involve any emotions. And that's usually where traders fail is you know when you

24:06have a stop loss and then you're like well, I'm just going to drop my stop loss a bit cuz we'll give it more room. Uh an algo has no emotion. So we see that um the pass rate of algos is actually higher of that of humans. Um for some context the human trader pass rate is 13.5%. And the one of algos is 15%. So the odds of succeeding with an algo

24:33is actually higher than that of humans today. >> Mhm. It's a good statistic. And yeah, those emotional trades they get you. You get excited. And uh and moving your original strategy is usually doesn't work out. >> Um well, I've been I mean I've been trading the markets and I'm still sometimes make those mistake and um there are pros and cons to an

25:02opportunity trading through algos, but that's just one of them. And the advice we give to traders is um you have to think of risk first before thinking of the upside. So, whenever you enter a trade, it's about how much you're willing to lose as opposed to how much you're willing to gain. And algos are very good at this. Um if you put on a trade and you identify

25:25that the risk-to-reward ratio is not good enough, then they're not going to take that trade. And and actually I can tell you that uh number one trader on our on our platform is a bot and is not a human. >> That's some tough competition to come up to go up against. Uh that's really interesting. Um so with proper acting as that funding layer to move into other trading apps,

25:51what's the what's the goal? What's the next integrations or how else are you looking to expand in in the near future? >> Yeah. So, it's really for us it's about funding anyone with anything. And we started with traders through our own interface. Now we have agents, and then we want to access existing distribution networks. And typically those are into existing apps.

26:16So, as we publish this, you'll see that we have the most exciting announcement we've had since the beginning of Proper, which is our integration with mmt.gg, which is one of the largest order flow tool in in in crypto. Concretely, what it means is as a user of the platform, you're able to trade with funded capital that's supplied by Proper. And that's a big that's a big change for

26:45the prop industry because for one of the first times you're able to access prop funding from an interface that you already use. >> Mhm. >> And you can see over time that we'll have more platforms and more apps that will embed this uh same solution. Just like you embed Hyperliquid today on platforms like Phantom, MetaMask. Uh you can think that the same will

27:09happen to prop trading and Proper will be the main supplier of of of this equity. >> Wow, that's very exciting. Uh looking forward to testing out the uh the poly market and the MMT. Uh what's the best way for people to learn more that are you know, they've dabbled in in in prop trading and they want to look at the funding through Proper and look at the integrations.

27:32>> I think I mean, if you if you want to like we're we're super transparent on anything and I think if you're accustomed to prop trading, you need to look at our transparency dashboard. Uh it's proper.xyz/transparency and and that's where you'll see how different we are to the other firms. You can see everything in real time, like how we hedge positions, even our

27:56EBITDA. Uh it like we give you that in in real time. So, you see how much money we make and if we lose on a given day, you also see how much we lose. And that's something that no one's actually doing in the space, too. Um at least the extent to which we're transparent about this. Same for the affiliate payouts. Uh you see how much is going to affiliate. Um how much like how much of

28:22our traffic is organic, how much of our of our traffic is referral based and things of that sort. Which I invite every prop trader to look at and that's should hopefully spark some curiosity about the things that we're building and then eventually if you're interested, you can access our platform, too. And then trade on poly markets and then trade through different apps that will uh

28:47will uh be powered by Proper. >> Yeah, that's really nice. And that transparency dashboard that's that's you're going all in, you know, a lot of these traders on social media, they post their winning trades, but like they're not they never post like a losing trade, rarely. And having that dashboard there to see fully if you're up or down and the earnings or

29:11the losses, it's there's nowhere to hide. So, you know, you can show the growth in in real time. So, props to that for you guys. And looking forward to trying out these integrations myself. I already have, but the ones that are coming out with Polymarket MMT, I'll leave those links in the show notes below and wishing you all the best. Excited to see the AI agent trading part

29:35grow. Would love to have you back on in the coming months to follow up on that and everything else. >> Yeah, for sure. No, that was a It was a great time hearing um Yeah, it was great explaining what what Proper is and things this MMT integration is the first I um speak the world about and I'm I'm very excited about. This team did a great job there.

29:55A ton of work went into it. Proper is so new. We've been in the market for about 2 and 1/2 months now. Uh and so, yeah, so much to come and yeah, we'd we'd love to come back in the in the next couple of months. >> Great. Thank you, Louis. >> Thanks.