To run a business, a company must buy a numberof software licenses to effectively enter the market. Granted, some of them aremore heavily ingrained into business processes than others. But, it is recklessto think that a single provider of software licenses can not only shape yourbusiness but influence it if you can participate in the industry at all.
Sure, there are technologies based onsubstantial scientific or engineering challenges, but with all due respect toour industry that I have been serving for 13 years, it is a stretch to calltrading platforms deeptech. I know this because I’ve assembled numerous techteams from scratch, including cases where team members didn’t have prior domainexperience, and they were able to roll out all kinds of trading platforms.Yes, it is hard to make great trading platforms, but not that hard.
Fortunately, there are enough platformproviders out there for healthy competition, which benefits everyone. Thistaught me some humility. No matter how much pride a platform provider takes to build a great product, there are others. It is a red ocean.
AstroPay payment provider connects to MetaTrader 5 Payments https://t.co/R8My8LFwg0
— MetaQuotes Official News (@MetaQuotes_News) February 7, 2024
MQ has grown big enough to make the industrydependent on their services, allowing them to dictate the rules of the CFDbusiness. They've evolved into a business-critical front-office part of the business, like a franchisor deciding if you are accepted as afranchisee, controlling client-facing aspects and dictating operational strategies. The uncertainty is theworst, as the MT licenses can be revoked at a very short notice like a rug pulled out from under one's feet. Imagine if Zendesk or Slack restricted youto the degree that MQ does.
Anyway, this is the behavior of a company thatbelieves it will be undisputed forever. If a franchisor is opaque anddemonstrates unchecked arrogance towards clients, would you keep buyingfranchises from them?
Evolution of Retail Trading & Evolution of Vendors
People love trading: Manual, algorithmic,social, PAMM, cash or margin, listed or off-exchange, securities, forex,futures, options, signals, indicators, news, fundamentals, and alternative data. There are somany styles and possibilities!
Trading platform providers usually support a wide range of assets. When cryptos became a thing, many providers started supporting them.Initially to different degrees, sometimes it was just fractional volumes or anew crypto-specific widget in an iframe, sometimes it was a full-fledged limitorder book, or internal matching engines. A similar pattern emerged with binary options prior to that.
Believe me, if the NFT hype hadn't fizzled out so quickly, you'd likely find them alongside crypto pairs on trading platforms. These platforms evolvefollowing client demand. Any product or asset that is not short-livedand remains in demand by the traders will be supported by the trading platformproviders.
Funded trading is not a new concept. Now, it isat an inflection point where the business model runs on competition andevaluation more than on different profit-sharing arrangements.
Presently, we have the charges to take qualificationtests, next it could be “pro traders membership fees” or something else.Apparently, if the industry has found a way to generate revenue outside offinancial services, provided that there is no misinformation or scam, well,that’s the natural evolution of the industry. It is not news that companies canbenefit from other sources of revenue, not just commissions, spreads or swaps,but from additional services or data: premium analytics, real-time level-2 marketdata from the exchanges, and other digital products.
Prop trading makes sense, as do many othermodels that the industry exercises.
While technology providers are free to implementtheir own strategies, those reliant on brokers andprop firms, will inevitably heed the clients' demands.
Brokerage vs Prop Trading Platforms – Is There a Difference?
It is evident that the mechanics of the proptrading business are almost identical to regular retail trading. So, there is no surprisethat all of those proprietary trading firms (props) run on “regular” trading platforms.
Sure, a few providers have introduced additional features. Meanwhile, others let the plugin developers make minor adjustments, such as calculation of the max drawdown. However, these scenarios pale in comparison to the broader spectrum of trading platform development.
Yes, sometimes you will see that it might notquite fit. Take this Demo/Live account issue: props that arenotoriously famous in the press lately, run their businesses on tradingplatforms that offer Demo/Live accounts segregation, which was originally how aregular CFDs broker would solicit clients. They would start with a Demo, evaluatethe number of instruments and spreads, prior to opening a Live account.
— Tools for Brokers (@Tools4brokers) September 14, 2023The new TFB's offer for Prop Trading firms
TFB has partnered with Red Acre to create a powerful, all-encompassing offer for Prop Trading companies looking to stand out from the competition and provide an excellent experience to traders.
👉 https://t.co/n2XCQ1Evbv#PropTrading pic.twitter.com/zyT72fUC80
In the current form, props cankeep the clients on Demo accounts, so the clients trade in a synthetic/virtualenvironment, which is just a fancy new name for paper money trading, or goodold Demo accounts. Whether those firms have a prop account thathedges traders who passed the competition is a reincarnation of “are you anA-book or B-book broker?”
The Perfect Storm for Change
The hot question is: does it make sense for thetech providers to differentiate from what MQ is doing? MQ is dropping theprops, are you sure you want these clients?
Apprehensive that MQ might possess informationthat others are not privy to, many started to speculate who (regulators,authorities) approached whom.
However, the upheaval in the industry does notappear to be linked to regulatory actions, as there have been no officialcomments or rulings from governing bodies. The affected accounts are demoevaluation accounts, with user trades transitioning to regulated brokers uponcompleting the associated challenges. This industry-wide buzz seems to be aresult of MQ's efforts to safeguard its interests. Many prop firms areutilizing licenses from other brokers, enabling them to operate independentlyfrom MQ's influence.
Notably, 95% of the accounts are demo, therebyavoiding charges associated with live MQ licenses. Moreover, MQ is wary ofpotential complaints in app stores, aiming to protect their iOS app and preventconfusion among end-users.
To Onboard or Not to Onboard?
In my view, discerning between the ethical standards of a regular FX provider and a funded trader firm proves challenging, as they represent a new breed with subtle distinctions. This ongoing struggle prompts reactionsfrom FTC-like organizations mandating better monitoring and compliance measures.
But people love trading, and where the demandis, the supply will follow. Most probably, props will adapt andbecome quirky, adopting more unconventional approaches diverging from their current models.
Platform providers have been waiting for suchturbulence or tectonic shifts and shouldn’t miss on this. This is a perfectstorm.
The providers, that are not dependent on MQ,will certainly participate in the redistribution and will onboard all the MQ refugees. They will (or already have) put necessary (mainly legal, but alsotechnical) controls in place, enhancing KYB processes while offering servicesto all the legitimate props. While opportunists may exploit the situation, this would also happen withtraditional FX/CFD trading players.
— Smart Prop Trader (@SmartPropTrader) February 16, 2024Our team is working with other brokers & bringing significant innovations that will counter these widespread industry issues within 2-3 weeks.
Think Markets live by end of next week ✅
My refrain is the same: similarly to howproviders supported classic CFD brokers of all breeds (B-book, A-book, C-book,etc.), they will extend similar support to props.
Did you onboard bucket shops and let theclients do backdate changes to the trades uncontrollably? Or did you focus solely on firms compliant with reasonable regulations, who demonstrated thesigns of credible business practices? Or did you follow different paths? The principle applies universally. Inmy books, it is no different with the props.
Hurray to More Competition
But, there’s more to it than that. Many predatoryproviders dream of this scenario: a rare chance to push the falling one. To befrank, we are very far from calling MQ “falling”, but it is a great chance formany to secure better positions in terms of market share. A chance to put theirbest foot forward and showcase their product and services, and finally, tocreate fair competition for a better evolution of the trading industry,perhaps, to even challenge the monopoly that's grown too comfortable in itsseat of power.
Source: LinkedIn
I’ll be promoting the idea of embracing multiple platforms, considering proprietary solutions, and refusing to be cowedby the specter of MetaQuotes' monopoly. Obviously, there has to be fulldisclosure that one of Devexperts’ products, DXtrade, competes with MT5. I alsoworked at Spotware Systems and participated in the launch of its cTradersuite, so I’m rooting for both cTrader and DXtrade.
However, I would like to reiterate an ideathat is not heard too often in the cacophony of providers names.Commercial-off-the-shelf solutions cater to non-strategic business processes, require organizations to conform their operations to pre-packaged software.
I doubt that every broker or prop firm thatdreams big would like to conform to the rigid standards of a standardized tradingplatform provider for long. We’ve seen brokers complain about how easyusers switch between brokers because the instruments and the technology areidentical and everybody ends up competing on the spreads and eating up theprofits.
This scenario mirrors the dynamics of a perfectly competitive market, where profitability diminishes.
So, some of you will want to differentiate, andthat will mean differentiating the UX, too. Then, you will need a custom trading platform, and you know where to find us.
To run a business, a company must buy a numberof software licenses to effectively enter the market. Granted, some of them aremore heavily ingrained into business processes than others. But, it is recklessto think that a single provider of software licenses can not only shape yourbusiness but influence it if you can participate in the industry at all.
Sure, there are technologies based onsubstantial scientific or engineering challenges, but with all due respect toour industry that I have been serving for 13 years, it is a stretch to calltrading platforms deeptech. I know this because I’ve assembled numerous techteams from scratch, including cases where team members didn’t have prior domainexperience, and they were able to roll out all kinds of trading platforms.Yes, it is hard to make great trading platforms, but not that hard.
Fortunately, there are enough platformproviders out there for healthy competition, which benefits everyone. Thistaught me some humility. No matter how much pride a platform provider takes to build a great product, there are others. It is a red ocean.
AstroPay payment provider connects to MetaTrader 5 Payments https://t.co/R8My8LFwg0
— MetaQuotes Official News (@MetaQuotes_News) February 7, 2024
MQ has grown big enough to make the industrydependent on their services, allowing them to dictate the rules of the CFDbusiness. They've evolved into a business-critical front-office part of the business, like a franchisor deciding if you are accepted as afranchisee, controlling client-facing aspects and dictating operational strategies. The uncertainty is theworst, as the MT licenses can be revoked at a very short notice like a rug pulled out from under one's feet. Imagine if Zendesk or Slack restricted youto the degree that MQ does.
Anyway, this is the behavior of a company thatbelieves it will be undisputed forever. If a franchisor is opaque anddemonstrates unchecked arrogance towards clients, would you keep buyingfranchises from them?
Evolution of Retail Trading & Evolution of Vendors
People love trading: Manual, algorithmic,social, PAMM, cash or margin, listed or off-exchange, securities, forex,futures, options, signals, indicators, news, fundamentals, and alternative data. There are somany styles and possibilities!
Trading platform providers usually support a wide range of assets. When cryptos became a thing, many providers started supporting them.Initially to different degrees, sometimes it was just fractional volumes or anew crypto-specific widget in an iframe, sometimes it was a full-fledged limitorder book, or internal matching engines. A similar pattern emerged with binary options prior to that.
Believe me, if the NFT hype hadn't fizzled out so quickly, you'd likely find them alongside crypto pairs on trading platforms. These platforms evolvefollowing client demand. Any product or asset that is not short-livedand remains in demand by the traders will be supported by the trading platformproviders.
Funded trading is not a new concept. Now, it isat an inflection point where the business model runs on competition andevaluation more than on different profit-sharing arrangements.
ADVERTIsem*nT
Presently, we have the charges to take qualificationtests, next it could be “pro traders membership fees” or something else.Apparently, if the industry has found a way to generate revenue outside offinancial services, provided that there is no misinformation or scam, well,that’s the natural evolution of the industry. It is not news that companies canbenefit from other sources of revenue, not just commissions, spreads or swaps,but from additional services or data: premium analytics, real-time level-2 marketdata from the exchanges, and other digital products.
Prop trading makes sense, as do many othermodels that the industry exercises.
While technology providers are free to implementtheir own strategies, those reliant on brokers andprop firms, will inevitably heed the clients' demands.
Brokerage vs Prop Trading Platforms – Is There a Difference?
It is evident that the mechanics of the proptrading business are almost identical to regular retail trading. So, there is no surprisethat all of those proprietary trading firms (props) run on “regular” trading platforms.
Sure, a few providers have introduced additional features. Meanwhile, others let the plugin developers make minor adjustments, such as calculation of the max drawdown. However, these scenarios pale in comparison to the broader spectrum of trading platform development.
Yes, sometimes you will see that it might notquite fit. Take this Demo/Live account issue: props that arenotoriously famous in the press lately, run their businesses on tradingplatforms that offer Demo/Live accounts segregation, which was originally how aregular CFDs broker would solicit clients. They would start with a Demo, evaluatethe number of instruments and spreads, prior to opening a Live account.
— Tools for Brokers (@Tools4brokers) September 14, 2023The new TFB's offer for Prop Trading firms
TFB has partnered with Red Acre to create a powerful, all-encompassing offer for Prop Trading companies looking to stand out from the competition and provide an excellent experience to traders.
👉 https://t.co/n2XCQ1Evbv#PropTrading pic.twitter.com/zyT72fUC80
In the current form, props cankeep the clients on Demo accounts, so the clients trade in a synthetic/virtualenvironment, which is just a fancy new name for paper money trading, or goodold Demo accounts. Whether those firms have a prop account thathedges traders who passed the competition is a reincarnation of “are you anA-book or B-book broker?”
The Perfect Storm for Change
The hot question is: does it make sense for thetech providers to differentiate from what MQ is doing? MQ is dropping theprops, are you sure you want these clients?
Apprehensive that MQ might possess informationthat others are not privy to, many started to speculate who (regulators,authorities) approached whom.
However, the upheaval in the industry does notappear to be linked to regulatory actions, as there have been no officialcomments or rulings from governing bodies. The affected accounts are demoevaluation accounts, with user trades transitioning to regulated brokers uponcompleting the associated challenges. This industry-wide buzz seems to be aresult of MQ's efforts to safeguard its interests. Many prop firms areutilizing licenses from other brokers, enabling them to operate independentlyfrom MQ's influence.
Notably, 95% of the accounts are demo, therebyavoiding charges associated with live MQ licenses. Moreover, MQ is wary ofpotential complaints in app stores, aiming to protect their iOS app and preventconfusion among end-users.
To Onboard or Not to Onboard?
In my view, discerning between the ethical standards of a regular FX provider and a funded trader firm proves challenging, as they represent a new breed with subtle distinctions. This ongoing struggle prompts reactionsfrom FTC-like organizations mandating better monitoring and compliance measures.
But people love trading, and where the demandis, the supply will follow. Most probably, props will adapt andbecome quirky, adopting more unconventional approaches diverging from their current models.
Platform providers have been waiting for suchturbulence or tectonic shifts and shouldn’t miss on this. This is a perfectstorm.
The providers, that are not dependent on MQ,will certainly participate in the redistribution and will onboard all the MQ refugees. They will (or already have) put necessary (mainly legal, but alsotechnical) controls in place, enhancing KYB processes while offering servicesto all the legitimate props. While opportunists may exploit the situation, this would also happen withtraditional FX/CFD trading players.
— Smart Prop Trader (@SmartPropTrader) February 16, 2024Our team is working with other brokers & bringing significant innovations that will counter these widespread industry issues within 2-3 weeks.
Think Markets live by end of next week ✅
My refrain is the same: similarly to howproviders supported classic CFD brokers of all breeds (B-book, A-book, C-book,etc.), they will extend similar support to props.
Did you onboard bucket shops and let theclients do backdate changes to the trades uncontrollably? Or did you focus solely on firms compliant with reasonable regulations, who demonstrated thesigns of credible business practices? Or did you follow different paths? The principle applies universally. Inmy books, it is no different with the props.
Hurray to More Competition
But, there’s more to it than that. Many predatoryproviders dream of this scenario: a rare chance to push the falling one. To befrank, we are very far from calling MQ “falling”, but it is a great chance formany to secure better positions in terms of market share. A chance to put theirbest foot forward and showcase their product and services, and finally, tocreate fair competition for a better evolution of the trading industry,perhaps, to even challenge the monopoly that's grown too comfortable in itsseat of power.
Source: LinkedIn
I’ll be promoting the idea of embracing multiple platforms, considering proprietary solutions, and refusing to be cowedby the specter of MetaQuotes' monopoly. Obviously, there has to be fulldisclosure that one of Devexperts’ products, DXtrade, competes with MT5. I alsoworked at Spotware Systems and participated in the launch of its cTradersuite, so I’m rooting for both cTrader and DXtrade.
However, I would like to reiterate an ideathat is not heard too often in the cacophony of providers names.Commercial-off-the-shelf solutions cater to non-strategic business processes, require organizations to conform their operations to pre-packaged software.
I doubt that every broker or prop firm thatdreams big would like to conform to the rigid standards of a standardized tradingplatform provider for long. We’ve seen brokers complain about how easyusers switch between brokers because the instruments and the technology areidentical and everybody ends up competing on the spreads and eating up theprofits.
This scenario mirrors the dynamics of a perfectly competitive market, where profitability diminishes.
So, some of you will want to differentiate, andthat will mean differentiating the UX, too. Then, you will need a custom trading platform, and you know where to find us.
