MetaTrader 4’s imminent discontinuation: The ambiguity and the fallout researched

As 2017 gave way to 2018, a milestone event occurred which signaled the imminent end of an era that propelled small retail brokerages and created the highly competitive generic platform environment that exists today.

MetaQuotes, the Cyprus-based software company that produces the MetaTrader 4 retail trading platform, abruptly decided that it would discontinue the ubiquitous trading interface, giving rise to abundant ambiguity as to whether any level of support would be provided to existing brokers, and if so, to what level.

On January 12 this year, MetaQuotes confirmed that the company will stop issuing new licenses to new brokerages, although the MetaTrader 4 platform can continue to be used by existing customers.

Brokers who are already using the software will not be able to expand their operations on the platform, as no new servers will be issued in any capacity.

At the time, FinanceFeeds took the view that whilst white label MetaTrader 4 solutions are regarded as the cheapest and quickest way to enter the retail market, with firms paying subscriptions to a third party provider instead of acquiring a full license from MetaQuotes, this also comes with the downside of less (or no) control over strategic decisions such as spread and products offered, potential conflict of interests as the provider is usually a competitor, and difficulty to scale the operation.

Looking at the brokers which are able to move their products and services forward, all of them have invested tremendous amounts in R&D and continual in house development of platform technology.

Swissquote, for example, has over 2.5 million products across its derivatives and spot platforms. That is the largest product range outside of Chicago.

CMC Markets and IG Group have a substantial and very loyal domestic market customer base in the United Kingdom, a notoriously analytical and conservative market, largely due to their ability to provide specific solutions and a full end-to-end trading experience.

It also positions them to enter new regions with corporate aplomb. IG Group recently applied for an NFA license and will re-enter the US market. This would not be possible for a small Cyprus based broker with a MetaTrader 4 license and no genuine product.

Today, FinanceFeeds has spoken to a series of specialist management consultancies on both sides of the Atlantic, one particular entity having been founded by a former FX industry executive who understands the need for sustainable trading environments that are not subject to sweeping and sudden changes that alter the operational functionality of a brokerage with no recourse.

A consultant at the firm explained to FinanceFeeds “I would say that MetaQuotes ambiguous move to discontinue MT4 without detailing exactly what level of service will be offered to existing firms, and to those who have recently applied for more licenses, is potentially damaging to the ongoing operations of retail brokerages.”

“We find that despite our interaction with the operational management of many brokerages on a regular basis, it is almost impossible to estimate whether companies looking to expand their services and applied to do so before MetaQuotes announced its decision to stop issuing new MetaTrader 4 licenses, or those with existing licenses that need to scale their business and understand where to make future amendments to their infrastructure or how to plan for it” said the consultant.

“It is almost impossible at present for many brokerages to know whether they will have to completely start from scratch with new MetaTrader 5 platforms and a single server (MetaTrader 5 only requires one server for global sites – Ed) and if so, will this fit within the ideology of the brokerage in terms of product range and marketing. For example, some smaller brokers opt for MetaTrader 4 simply due to its EA compatibility so that they can onboard MAM accounts in Asia. If forced away from this in entirety, it may require a complete rethink by a small firm that is unable to do so, hence why they took a third party solution in the first place.”

Once again, this highlights the importance of remaining a master of one’s own destiny, and also the potential impact on our industry that a monopolization such as that created by MetaTrader 4 can create.

Yes, indeed, it is a very simple process to start a brokerage with a completely universally accepted platform that comes off the shelf, with no need for IT departments and support staff, and the ability to onboard clients who are familiar with it globally, but at a price, the price being uncertainty.

Once again, this reiterates FinanceFeeds perspective that from a software provision point of view, the imminent deletion of MetaTrader 4 has been, in our opinion, handled very heavy handedly, especially bearing in mind the dependency on it that has been created in the smaller retail market.

Yes, it is possible to suggest that brokers that invest nothing in their resources and just churn leads and then close shop after two years and make no effort to develop their own business can only expect to have to pander to a platform firm that pulls the carpet out from them when it sees fit, however communication and execution is critical here, and MetaQuotes did not communicate well with its technology partners or broker customers.

As was our perspective at the time of announcement, we reiterate that if MetaQuotes wants to be respected at the level of a “global enterprise financial technology provider” they should act like one. In this case, they have all the right to deprecate MT4 and devote their resources to a new system, a viewpoint that has since been echoed by many long-standing FX industry executives that FinanceFeeds has spoken to on the matter.

Similarly, ancillary service providers in the educational sector and client support sectors have stated their concerns to FinanceFeeds, those being that the services provided to traders which enhance the trading experience, be it via charting, or analytics, webinars or news provision may well be affected adversely with no ability to work alongside the software provider to form a new generation of services suited to existing legacy MetaTrader 4 platforms and new MetaTrader 5 entities that have had to adopt the newer platform from the ground up.

This gives some credibility to what was considered almost five years ago now to be an attempt to remove the third party applications marketplace and internalize it by MetaQuotes. At that time, MetaQuotes introduced a marketplace in which all third party applications that were designed around MetaTrader 4 had to be submitted to MetaQuotes first, and offered centrally. It could be that by not providing a full detail on service and support going forward, MetaQuotes is looking at this ecosystem once again.

That may appear a very harsh standpoint, however having spoken to several industry leaders earlier this month in London and North America, both regions of great significance when it comes to retail FX technology development, our view is not at all out of line with industry sentiment.

This being said, for a respected global financial technology provider, communication is almost as important as the actual technical reasoning behind this type of decision.

Therefore, when MetaQuotes makes this type of abrupt, line-in-the-sand type decision it significantly lowers the confidence of the industry that they are going to continue to make rational decisions.

On this basis, it pushes clients to look else where for solutions, not because the technology is bad but because the communication strategy is erratic and unpredictable. Yes indeed, MetaTrader 4 has been the choice of those wishing to have an also-ran system that it can take straight to market and have immediate EA compatibility, and thus a small broker can then conduct sales and marketing activities, but these days competition is indeed part of the deal.

No longer is it a case of resting on laurels, knowing that many Cyprus or CIS based firms are not going to plan and develop their own systems, hence they only have one place to go. Spotware Systems, for example, will design a completely custom platform for any brokerage, giving smaller firms almost the same advantage as those with proprietary platforms for a fraction of the cost, meaning tailoring to each market and each broker ethos is entirely possible.

Yes, it could well be that MetaQuotes realizes that the retail companies that are not part of the established class with proprietary platforms are dependent on what its software, and whilst the apathy in regions like Cyprus remain, and company owners there are too concerned with short-termism and churning leads rather than building their own fully fledged operations and garnering a loyal long term client base as is the case with IG Group, Interactive Brokers, CMC Markets and Swissquote, then MetaQuotes has the upper hand, however it would only take a few hires of some very astute operations directors to change this.

If that were the case, Spotware could provide bespoke and customized systems, giving a retail brokerage the look and feel of a high end firm with its own platform, and thus encouraging clients to stay long term as they would be working with a firm that tailored its services toward its customers rather than provided a tool for them to be poached by 1230 other brokers and churned by sales-led lead calling teams with no control over the trading environment.

In the opinion of many senior executives spoken to at the time of the decision, the primary reasons brokers have resisted moving to MT5 is not because they do not like the new platform, but because they have been burned by MetaQuotes in the past for how they’ve made decisions (Mobile Terminal support being one example). So, whether they realize it or not, the most counter intuitive thing they could’ve done to help continue to bolster support for MT5 is make an impulsive, dramatic end to MT4.

Those who know me well will remember me from my 18 years spent as a self-employed systems engineer in interbank trading desks, as well as at outside providers such as BT Radianz (British Telecom Financial Technology at the time), Accenture and PA Consulting who were contracted to develop deployable Windows server applications to interbank trading desks. For a large part of my 26 year career in the electronic trading industry, that was my main experience, hence an example of how to do this properly can be given from the history of Microsoft’s methodology on phasing in and out of enterprise operating systems.

Windows XP was a very popular operating system and there was a lot of financial services industry resistance to moving to Vista, or 7 from within in-house R&D and support divisions of financial institutions.

Microsoft announced the end of sales for Windows XP 2 years in advance, and Vista was regarded as generally inferior in every way, whereas Windows 7 corrected many of the criticisms. Microsoft did not force the issue until adoption of 7 reached critical mass, so the company stopped selling in 2010 and stopped supporting Support for Windows XP Service Pack 3 will continue through April 2014.

So to make the similarity, the entirety of global business was dependent on Windows NT 3.51 when Microsoft began to offer proper server-based enterprise infrastructure which many bank trading desks and connectivity and hosting firms adopted to replace legacy IBM middleware systems that were as big as a house and very ineffective, then subsequently Windows NT4, Windows 2000 and Windows XP.

Withdrawing the last of that line (XP) was a major cause of ramifications for many firms so Microsoft did it slowly and with massive support.

Yes, you reap what you sow by not having your own infrastructure and by having a short term mindset, but a software provider that is this integral to the industry’s fabric – and in MetaQuotes case this can be considered absolutely integral on a monopolistic scale – pulling the plug in this fashion should be a sharp and harsh lesson to all of us in any capacity of the industry.