FinanceFeeds Podcast Ep.#18: Match-Trade CEO offers key insights into FX industry challenges
The 18th episode of the FinanceFeeds Podcast is out, featuring Michal Karczewski, CEO of Match-Trade Technologies and Co-Founder of Match-Prime Liquidity. The first brand is a creator of the Match-Trader, a trading platform for Forex Brokers, and the latter is a CySEC-authorized liquidity provider for all CFD markets.
Match-Trade is celebrating its 10-year anniversary. Established in 2013, the firm started by building a matching engine for FX brokers using a similar model to the LMAX. Following the “trial and error” approach, the founders realized it didn’t go as expected and adjusted their business strategy: they bought an MT4 server and started offering MT4 white labels.
The MT4 white label offering proved successful and allowed Match-Trade to develop complementary services, such as a client office and MT4 bridge. As demand for an MT5 white label offering grew, the firm bought an MT5 server as well.
“Innovation” is a resounding word at Match-Trade. Michal Karczewski, who joined in 2017 as COO, told FinanceFeeds Editor-in-Chief Nikolai Isayev that people at the expos that year raised eyebrows when he talked about offering crypto solutions. This was right before Bitcoin peaked at $20,000 and CME announced a Bitcoin futures offering.
In 2018, riding the wave of popularity for cryptocurrencies, Match-Trade redesigned its matching engine for digital assets launching a crypto exchange as a white label solution. Looking back, Michal Karczewski admits the idea didn’t work out well, as running a crypto exchange is far more complicated and resource-consuming than forex brokerage. And as a commission-based business, it requires a long-term strategy to become profitable, unlike FX, where brokers can b-book the flow, and the revenue is much higher.
“None of the exchanges survived. We lost one year on developing the crypto exchange platform”, but it turned out the time wasn’t completely wasted, “out of this platform, we have Match2Pay, a crypto payment gateway which is now used by FX brokers”. for deposits”.
Perfect timing: Match-Trader server license launch just before MetaQuotes – Apple debacle
The next challenge was figuring out how to upsell the MT4/5 white label solutions. “We decided this was the time to start building a Web Trader; we already had an institutional platform that we offered to Liquidity Providers”, he continued, adding that the platform’s frontend was redesigned for a retail clientbase with the goal of connecting it first to MT4/5 infrastructure. Metaquotes, however, didn’t like the idea and asked them not to go forward with that project.
This was how Match-Trader, the retail trading platform, was born. First offered to smaller brokers as white labels, and more recently, the firm shifted its strategy and now sells it as a server license to bigger brokers in a move that turned out to be quite lucky in terms of timing. The Match-Trader launch as a server license happened just a few months before the suspension of MetaQuotes from the Apple Store, and Michal Karczewski started getting calls from FX brokers right after the news broke, he told Nikolai Isayev.
In the meantime, the company secured a CySEC license to allow brokers to connect to a Liquidity Provider to hedge their risk.
Match-Trade growth driven by innovation, retail orientation, pricing, marketing, and volatility
During the “six years of hard work” since Michal Karczewski joined Match-Trade, the firm changed significantly, growing in terms of employees, clients, and revenue. As he now jokes at the beginning, even attending the Cyprus expo was challenging.
The Match-Trade chief executive explained how such growth came about. “We managed to foresee some changes in the industry and were able to anticipate some moves. That’s what, I believe, boosted our growth”, he said, adding that other factors include the firm’s retail-experienced staff – joining from XTB – who also understands the needs of brokers very well.
Competitive prices, flexible offers attracting lots of partners, a good marketing team, and the macro environment are other key factors bringing new clients and increased revenues. After establishing its position among industry leaders, the company is ready to take on new challenges. Because of the current level of product advancement and a highly developed ecosystem, “we are changing our strategy a bit, shifting towards bigger, well-established and regulated brokers”.
FX industry vs Gambling industry
Michal Karczewski does his research. He confided that he listened to all FinanceFeeds Podcast episodes. This attentive approach to business also led him to take an interest in the gambling industry, which has many similarities to the FX industry (white labels, turnkey solutions, licenses), but significant differences in how providers cooperate with casinos and sportsbooks.
“In our industry, technology providers either charge a turnover fee or a fixed fee per real accounts like we are doing. In gambling, they all work on a revenue share model, which is something I really like there; both parties have a common goal, and the provider has more resources to invest in developing their systems”, he said, adding that no one in the gambling industry is trying to dump prices as it happened in the forex industry, where key players in the market changed server prices at their whim.
Karczewski also compared the sublicensing model of each industry, noting that in gambling, it’s the provider’s responsibility to monitor its clients’ affiliate marketing communication and provide responsible gambling services to eliminate addiction. In contrast, in FX – being a much-regulated industry – some providers have difficulties in guaranteeing the quality of their white labels, he said, in a wink at the recent MetaQuotes suspension from the Apple Store.
The MetaQuotes ordeal
After approximately six months, the iOS versions of MetaTrader 4 and MetaTrader 5 have finally been restored. “MetaQuotes finally got compliant with Apple’s requirements”, he said as he noted the reason for the suspension. “The problem is that all brokers – big, small, reputable, or quite the opposite – are connected to the same app. Hence, when traders complain about their broker, it goes straight to the common app and hits all brokers. And Apple does not understand our industry. They don’t realize that there are thousands of brokers behind that app and that it’s the reason why there are so many complaints”. The trigger for the suspension was probably a recent wave of complaints from US citizens, he added.
The six-month suspension didn’t change much. MetaQuotes retains the dominant position in the trading platform business, but the industry seems to be going the diversification route regarding both trading platforms and mobile apps. This means that software developers are now making their apps available outside the stores.
This new trend of being independent from moves by Google or Apple is also being made possible because the European Union is forcing Apple to allow distribution outside of the App Store, which may eventually be followed in other jurisdictions. This is quite a significant change because iPhone users, although being about 30% of the market share, they probably represent over 50% of deposits. “But that’s just my guess, a quick assumption.”
Scams in forex happen regardless of the platform
Before being suspended by Apple, MetaQuotes tightened its policy, making KYC almost impossible for smaller brokers as they started to require corporate bank account confirmation. A few months later, they stopped selling white labels altogether.
This leads Michał Karczewski to believe that the biggest scams were not a problem caused by a certain type of license but rather dishonest or careless business owners abusing their “administrative privileges” over the platform. That’s why to avoid fraudulent behaviors Match-Trade never gives up all the rights – like the capability of changing the price, order size, or deleting the trade – to their clients.
Also, many of these dubious MT4/5 brokers were not, in fact, scams but failed FX brokers with considerably low budgets and poor risk management. “They were reckless or just greedy; without considering the risk, they put all eggs in one basket to see if the market allowed them to b-book everything and earn a lot of money. Most of them were unlucky and disappeared”. Greed, inexperience, lack of a budget, and too much exposure were the leading causes of failure for many of these brokers who look like FX scams”.
Solutions for FX brokers going bust: education and limits on risk
How to solve these recurring issues in the FX industry? Match-Trade already offers brokers proper education to manage risk, but Michal Karczewski proposes automatic limits on risk to ensure that brokers don’t blow up that easily and don’t hurt the industry’s reputation.
The Match-Trade chief executive believes MetaQuotes might resume the MT5 white label offering – not sure about MT4 nor when it happens. As he admits, MT4/5 white labels are still a significant part of Match-Trade’s revenue.
Even though the MetaQuotes suspension from the App Store helped raise brand awareness for the proprietary platform, Match-Trader, the company will continue selling MetaQuotes’ white labels. “It’s still the most popular platform. Even brokers that use alternative platforms also have MT4/5, and it’s probably where they have the majority of the volume. I read somewhere that 85% of the market uses MT5”.
Michal Karczewski believes every FX broker should be somewhat regulated, including the small ones and startups, even in a lower-tier jurisdiction. As trading volumes grow, the broker could secure a license with more reputed regulators. This, however, is unlikely to happen because too many jurisdictions allow forex brokers to operate without any license.
The SVG regulatory shock and the rise of FX in South Africa
This brings the two to the topic of St. Vincent and the Grenadines (SVG) and the regulator’s recent decision to require FX brokers to be regulated in another jurisdiction and a 45-day notice to provide proof. Such a move is expected to eliminate all brokers without any license elsewhere, as 45 days deadline is usually not enough to secure regulatory authorizations.
“I’m curious about SVG reasons. An island whose main income comes from those forex companies and related fees. Maybe it was forced by the US or EU… Someone had to pressure them. The requirements seem rather impossible to meet. In some cases, even illogical […] It is designed to clean up the market and remove all these so-called scam companies.”
The interview with Michal Karczewski provided many more insights, including the fall of EAs on MT4/5, the relationship between TradingView and MetaQuotes, and the fragmentation of the white label market as diversification becomes a wise option for FX and CFD brokers.
For 2023, Match-Trade will be onboarding a few renowned brokers and studying the EU’s MiCA regulation to stand prepared to provide the first and best possible solutions for the regulated digital asset industry. In addition, the firm will attend the upcoming expo in Mexico and the Finance Magnates South Africa Summit as the jurisdiction grows in popularity among brokers.
Sponsorship opportunities on FinanceFeeds Podcast
FinanceFeeds is the premier independent real-time news source for the FX and CFD trading industry, fintech, and the wider finance community. The podcast series opens up new sponsorship opportunities for companies looking to tap into our niche audience. For more information, please email us at [email protected].
All previous episodes of the FinanceFeeds Podcast are available on all popular streaming audio platforms.