It's an office set up specifically for traders. So, all the hardware and software is (usually) top notch kit that each trader rents on a monthly basis - known as a desk fee. Their commission charges are often less than those paid by retail traders (i.e. someone trading their own account from home). This is because of the volume generated collectively by all the traders in the arcade - enabling the arcade owners to negotiate a better deal.
Arcades and 'prop' shops (proprietary trading firms) tend to be used interchangeably. Perhaps someone else who knows more about them than I do can advise if there's a specific difference between the two. My understanding is that, generally, the latter tend to train their own traders - either for a fee and occasionally for free - and then provide them with funds to trade. The prop' shop owners take a fat chunk of the profits, plus the desk fee and a slice of the commission on each trade. If the trader doesn't perform, s/he is swiftly replaced by someone else. However, as has been mentioned on your other thread, care needs to be taken here as there are firms out there who offer little more to aspiring traders than vanity publishing houses offer to aspiring writers.
Take a gander at this FAQ: How Do I get a Job Trading? Specifically, check out the 'useful links' in post #3 - there's quite a lot of additional info on arcades and prop shops to be found there.
Not sure there is a difference between arcade and prop shop!
I used to work at a prop shop, they trained a bunch of new grads or fairly inexperienced traders and then let them lose on the market. We did get a salary, not amazing but above national avg and then got a 50% cut of our p/l. I know at other prop shops they used to pay their traders nothing in terms of basic but they'd get an 80% cut of the profits.
The other aspect and this may be where the distinction comes in, there are also customer traders. These are people who pay for a desk and related set-up (screens, bloomie etc) but they keep all their profit.....well kinda. The fee per lot will include a margin that goes to the firm. Maybe a pure arcade is one where it is just customer traders? But I'd hazard a guess they are 2 terms describing the same thing.
lol cheers tim for the pointing out the typo, "loose on the market" not "lose" lolololol. Irony being a lot of prop shops charge really high fees per round trip (buy/sell) so they like their newbies to lose early on and then trade thousands of lots getting back that p/l. Some good ones out there as well mind I think mine was one of the better ones as at least we got a salary!!!