Start a cTrader prop in 5 days
This week Goat Funded Trader (I know) announced that it had added MetaTrader back to its set of platforms.
The company said that it had become a ‘broker’ to facilitate that process.
However, if you actually look at what they did, they just went to St Lucia and set up a company there.
As most readers will be aware, St Lucia doesn’t have a regulatory regime governing CFDs so there is essentially no ‘license’ that you get if you operate a broker from the country. You just set up a company and you are good to go.
This is interesting for a few reasons.
It means that if you are a prop and now also have a brokerage arm, you have to effectively structure the broker arm as something like a partner business. The reason for this is, I am assuming, two-fold.
Firstly, if you just have the broker arm, then you are…a broker? And the result of that is you end up being subject to all of the same regulatory requirements that a broker has to deal with if you are onboarding from offshore.
The other part of this is that you will immediately get blocked by Google and Meta Ads because they’ll say you’re an unregulated financial services business. Like any other industry, a huge amount of prop marketing spend goes on these channels, so losing access to them would kill a lot of their traffic, leads, and end clients.
The result is that Goat Funded Trader (or ‘GFT’) has a bunch of disclaimers about how its St Lucia entity provides ‘simulated trading services’ which are actually sold and advertised by a separate entity.
Another weird part of this is the fact that MetaQuotes was, at some point, making it extremely difficult for companies with St Lucia entities to get a license. Over the last few years, firms in unregulated jurisdictions were often barred from using the platform.
Now it seems like, if you are a prop, you can just go to St Lucia, get an entity, and then get access to their platform.
That points to a wider change we’ve seen at MetaQuotes, which seems to have become more friendly to prop firms over the last few months.
For example, several firms now no longer have to put their prop URL and brokerage URL together – something that MetaQuotes had mandated they do previously.
Legend has it that the company has actually set up a new policy and fee structure for prop accounts, with a fixed monthly fee and a per account fee on top of that. I could not confirm if that is true or not.
As to why they have made these changes, the answer is obvious – prop has exploded and doesn’t appear to be going anywhere. Trying to kill the business won’t work and not working with props means missing out on a lot of potential sesterti, dinero, wonga, or whatever slang term you prefer to use.
For props there are still a couple of pitfalls to the product, although they will still likely push to get it.
One is that you cannot access the US market with MetaTrader, something many prop firms still want to do. For example, GFT now has a large disclaimer that MetaTrader 5 is not available to US clients.
The other problem is the brokerage arm point. The entire reason that props are able to do mass marketing and sell their product in the manner in which they currently do is because they are not regulated.
If you are pushed into being a broker then there is a lot more potential for problems, as noted above, with how you are treated by Google and Meta. Plus you have to think about whether or not what you are doing is compliant. Saying that you are separate businesses may work now but there is something about it that makes me feel a bit uneasy.
Those two factors point to a wider problem, which is the feeling of being coerced or pushed into doing something by a partner. As Nassim Taleb likes to quip – people will forget what you did, but people will never forget how you made them feel.