China’s FX platform conundrum. We dissect where MT4 and MT5 will fit into the future, live from Shanghai

The MetaTrader 4 platform’s continuing evergreen status has many facets, however one of the major reasons for its absolute ubiquity is its wide reaching compatibility with the plethora of automated trading robots – known as Expert Advisers or EAs.

The absolute dominance of automatically traded retail FX in mainland China continues unabated, and actually has gained massive ground during recent years with the establishment and rise to prominence of massive introducing brokerages which are in reality portfolio managers with assets under management standing at hundreds of millions of dollars across the entirety of the mainland of the People’s Republic.

The vast majority of the customers of China’s retail FX brokerages and introducing brokers view themselves as investors rather than traders, meaning that they simply put up the capital, often generated by monthly income from vast illiquid investments ranging from commercial property to agricultural technology so that it can be traded automatically on the MetaTrader 4 platform connected to one of China’s numerous and well trusted EAs.

This year, some six years after its initial launch, the MetaTrader 5 platform has been awoken from its slumber and is now gaining ground internationally among brokerages, technology providers and liquidity integration solutions providers, as well as executing venues at which listed derivatives are traded by retail customers.

Whilst retail brokerages and integration companies in free market nations have lauded the long awaited acceptance of MetaTrader 5 for reasons which include the ability to operate a global brokerage with many offices with just one server, thus theoretically reducing costs, as well as the superior technological topography of the platform over its predecessor, China’s dependence on the MetaTrader 4 platform presents a totally different picture.

Today, here in Shanghai, FinanceFeeds spoke to Yonglong Wu, Senior Sales Manager, Leverate in Shanghai to take a close and detailed look at the difference in user acceptance and brokerage compatibility between MetaTrader 4 and MetaTrader 5 when considering a completely domestic Chinese audience.

“As we all know, the MetaTrader 4 platform has been the most successful platform since its launch 10 years ago. Going back a whole decade, which is a lifetime in terms of computer science and development, computers were not as powerful as they are today. As MetaTrader 4 continues to be the dominant platform and has changed very little, whilst modern computers are far more powerful than those available when the MetaTrader 4 was launched, the whole world can support MT4 well because it use very little computer resources” explained Mr Wu.

“Another important consideration for China is that the MetaTrader 4 platform is a very open platform in which traders can add anything they like, such as email integration and EAs.”

“Last but not least, MetaTrader 4’s popularity owes a lot to it being the only platform that supports the variety of EAs in use in China” he epxlained.

“China is completely different from Western countries. China’s FX industy is completely B2B and heavily reliant on the IB model, therefore the MetaTrader 4 platform is a must because IBs like to attract retail traders by their experience and trading strategy, therefore it is standardized and does not require traders to start everything all over again if they move to a different IB” – Yonglong Wu, Senior Sales Manager, Leverate

With regard to drawing a comparison between MetaTrader 4 and MetaTrader 5 for use among Chinese brokerages, Mr. Wu said “It is easier to say that MetaTrader 5 is a more modern system because of its interface and also provides more new features that MT4 did not provide. For example, traders can see all the ticks and can check market depth.”

“One of the main reasons that MetaTrader 5 is less successful in China than the MetaTrader 4 platform is because China is a very big market and there are vast differences in user statuses between different cities” said Mr. Wu.

“This means that in certain large urban areas, such as Shanghai people all use very powerful laptops but in smaller peripheral areas, many computers are not as modern or powerful as they are in large urban cetners therefore supporting MetaTrader 5 is more resource hungry” he continued.

Mr. Wu concurs that a lot of traers still rely on EAs but currently most EAs in China are based on MQL4 language.

“Therefore if a broker forces clients to use MetaTrader 5, the EAs would need recoding from scratch in MQL5 language, which means that the brokers may lose clients.”

“With MetaTrader 5, the user experience is not as expected. Let me make an example. If a broker wants to mark up $10 commission on a trade, then a trader will see the commission charged, however in MetaTrader 5 the commission charge is combined within the floating profit & loss, therefore it is much more difficult for traders to realize the amount of commission that they have been charged.” – Yonglong Wu, Senior Sales Manager, Leverate

“In my opinin MetaTrader 5 is not upgrade of MetaTrader 4. Instead it is better to view these as two completely different trading platforms” explained Mr. Wu.

“I don’t think that the MetaTrader 5 platform will replace MetaTrader 4 in China in the near future. As we all know, MetaQuotes is presenting MetaTrader 5 very prominently now, however the ability to offer MetaTrader 4 is a must in the Chinese market.”

Therefore, Mr. Wu considers that within the next 2 to 5 years, most Chinese firms will provide both MetaTrader 4 and MetaTrader 5 congruently to meet different needs from different customers.

“For some new entrants to the market, MetaTrader 4 is preferable as it is more easy to use and they can find a lot of user info as it is ubiquitous whereas MetaTrader 5 is more aimed at professional traders, notable by its ability to link to exchanges, and its improved charting facilities” stated Mr. Wu.

It is important to note that whilst MetaTrader 5 has been connected to several brokerages that offer exchange traded futures contracts in emerging areas such as Dubai, it is not possible to connect the platform to exchanges in China because the government blocks it.

Instead, the only retail platform available to traders wishing to trade exchange traded futures in China is the official government-provided system that is totally engineered, developed, owned and deployed in China…. and according to many sources, is feeble.

For that reason, firms such as Direct FX have engineered exchange traded futures capability into their MetaTrader platform via a special adaptation that connects it to CME in Chicago, in order that Chinese investors can access US stocks and equities via their Chinese brokerage account.

In terms of practical considerations, the conditions of use and capitalization differ between MetaTrader 4 and MetaTrader 5.

For example, Mr. Wu stated that MetaTrader 4 is capitalized by the payment of a license fee and maintenance fee which is chargeable to brokers that use it, whereas brokers using MetaTrader 5 are charged according to the number of users. On that basis, in China, if a brokerage goes toward MetaTrader 5, it will cost a lot more than MetaTrader 4 to operate.

“For this reason” said Mr. Wu, “MetaTrader 5 will be a trend in the future, but not in the very near future, and will not replace the MetaTrader 4 platform.”

“At leverate we have been investigating the MetaTrader 5 solution, and have collected LXRisk liquidity bridge and the price feeds and server hosting as an MT5 solution for the Chinese market” he said.

“Some of our clients who used to use MetaTrader 4 white label from Leverate on a dedicated server are interested in knowing more about MetaTrader 5, so I believe that in future it will be popular but congruent to MetaTrader 4.

In conclusion, Mr. Wu said “In today’s world of rapidly developing technology, there are great challenges and great advantages. One decade ago, we could not imagine that we would all have smartphones. Keeping up with the rapid changes it is difficult but continual change is always good, therefore MetaTrader 5 will bring us new ideas and new features and integrate.”