MetaQuotes has long been the dominant platform provider in the CFD sector. According to a report by the Finance Magnates Intelligence team, MetaTrader 4 and 5 had a combined market share of close to 80% at the end of 2019. It’s unlikely there was any drastic change to this over the past couple of years.
This is remarkable for a couple of reasons. One is how long-lasting MT4 has been. A product that was released in 2005, pre-dating not just the iPhone and the iPod Touch but this author’s secondary school years, continues to be the most popular CFD trading platform in the sector today.
At the same time, it is a product that is used across the entire industry. Everyone from faceless entities in the Caribbean to highly regulated, listed companies, like IG Group and CMC Markets, has a MetaTrader offering.
This looks unlikely to change in the near term, even as MetaQuotes tries to make companies switch to the ‘newer’ MT5 – a product released a mere 12 years ago. But what may be shifting are the options for newer brokers in the ‘offshore’ sector.
Various sources within the CFD industry claim that MetaQuotes has been making it much tougher for some new brokers to acquire a white label. This has long been the go-to option for anyone starting a new CFD provider, as it was simple, relatively affordable, and meant you had a product clients may already have a level of familiarity with.
Huge regulatory pressures, along with the vast number of well capitalised brokers operating in the market, were already making it much trickier for new brokers to set up and do business in Europe, with Cyprus and the UK no longer easy options for ‘start-up’ style companies.
Often combined with a desire to engage in less scrupulous practices, this has led to more businesses not bothering with a European licence. Instead they head to places like Vanuatu, St Vincent and the Grenadines or, if they’re really classy, the Seychelles.
St Vincent and the Grenadines is notable in that the companies setting up shop there aren’t regulated at all. They’re registered in the country but do not have a regulatory licence. This is because the local regulator allows companies to engage in FX/CFD broking but does not actually regulate their activity.
A huge number of firms are doing this but some are finding that they cannot access MT4 or MT5 white labels. By some accounts, this has been going on for at least a year and, although it was initially confined to just MT4, it appears to have been extended to MT5 as well.
The main change appears to be a substantial increase in the level of documentation required to obtain a white label. As the necessary paperwork is extremely hard for these entities to obtain, it has had the effect of making it much more difficult for a company based in somewhere like St Vincent and the Grenadines to use MetaQuotes products.
“My guess is that the unregulated business involves too much liability so they’ve chosen to exit the space,” said one source. “[The documentation required] has narrowed down potential clients to only regulated entities.”
As the ‘guess’ component of that comment indicates, this is not definitive information, nor should it be taken as such.
Indeed, what is frustrating, according to industry insiders, is that no one actually knows what the MetaQuotes policy is. From the outside, it seems a bit like SEO managers working with Google – they have a rough idea of what works but the company doesn’t release exact guidelines on what to do.
Moreover, older companies which appear to not meet the current standards are still able to use MT4 or MT5, adding to the confusion as to what’s permitted and what is not. Allegedly this is causing problems for white label providers, who are stuck telling clients that they can’t access their services but don’t have a clear idea as to why.
“It’s been frustrating,” said one white label provider, who operates mainly in East Asia. “Clients will ask for a set of services and then we show them the documentation they need, which they can’t provide. Then they’ll turn around and point to other companies that are structured in the same way as them and say, ‘how come they can do it then?’ And we have no good answer because there is no document we can show them in order to explain why, which ultimately hurts us as a business.”
Is the door open for other platform providers?
MetaQuotes products aren’t likely to disappear and will probably remain supreme in the CFD world for a long time to come. But assuming there has been a change in policy, that could open up a sizeable segment of the industry to other platform providers.
There are some hurdles to overcome though. One is that the dominance of MetaTrader means important cogs in a broker’s operations are geared towards using the platform. Liquidity providers, clients, and even staff are all much more accustomed to using MetaQuotes products, which makes switching to a different platform hard.
At the same time, and although there are certainly exceptions, alternative providers can be…errr…not so great.
“Basically we find a lot of providers are good at marketing and sales but not at delivering,” said the white label provider. “So you get promised this full suite solution but when you get into really basic things like liquidity or customer service, you find that what you need just isn’t there.”
Is there an optimal solution? I don’t know. Maybe we’ll see lots of cTrader brokers start popping up in St Vincent and the Grenadines.
