MySQL GRANT PROXY - what does it mean?
MySQL User Authentication is a rather lengthy process to explain. I refer you to my 3.5-year-old answer to MySQL error: Access denied for user &#39;a&#39;@&#39;localhost&#39; (using password: YES) so you can see the steps a user takes to authenticate.
What the PROXY grant does is allow one user to masquerade as another user and bypass MySQL's normal but lengthy user authentication protocol.
Such proxy grants could be a security hole if one knew of this and started taking advantage of it. The quickest way to deactivate this would be to run
TRUNCATE TABLE mysql.proxies_priv;
FLUSH PRIVILEGES;

This will wipe out the current proxy privileges.
Afterwards, if you want to restrict proxy privileges, go to the OS and do this:
cd /var/lib/mysql/mysql
chmod -w proxies_priv.*

This will prevent new proxy privileges from being created.
GIVE IT A TRY !!!