To run a business, a company must buy a number of software licenses to effectively enter the market. Granted, some of them are more heavily ingrained into business processes than others. But, it is reckless to think that a single provider of software licenses can not only shape your business but influence it if you can participate in the industry at all.

Sure, there are technologies based on substantial scientific or engineering challenges, but with all due respect to our industry that I have been serving for 13 years, it is a stretch to call trading platforms deeptech. I know this because I’ve assembled numerous tech teams from scratch, including cases where team members didn’t have prior domain experience, 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 platform providers out there for healthy competition, which benefits everyone. This taught 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 industry dependent on their services, allowing them to dictate the rules of the CFD business. They've evolved into a business-critical front-office part of the business, like a franchisor deciding if you are accepted as a franchisee, controlling client-facing aspects and dictating operational strategies. The uncertainty is the worst, 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 you to the degree that MQ does.

Anyway, this is the behavior of a company that believes it will be undisputed forever. If a franchisor is opaque and demonstrates unchecked arrogance towards clients, would you keep buying franchises 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 so many 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 a new crypto-specific widget in an iframe, sometimes it was a full-fledged limit order 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 evolve following client demand. Any product or asset that is not short-lived and remains in demand by the traders will be supported by the trading platform providers.

Funded trading is not a new concept. Now, it is at an inflection point where the business model runs on competition and evaluation more than on different profit-sharing arrangements.

Presently, we have the charges to take qualification tests, next it could be “pro traders membership fees” or something else. Apparently, if the industry has found a way to generate revenue outside of financial services, provided that there is no misinformation or scam, well, that’s the natural evolution of the industry. It is not news that companies can benefit from other sources of revenue, not just commissions, spreads or swaps, but from additional services or data: premium analytics, real-time level-2 market data from the exchanges, and other digital products.

Prop trading makes sense, as do many other models that the industry exercises.

While technology providers are free to implement their own strategies, those reliant on brokers and prop firms, will inevitably heed the clients' demands.

Brokerage vs Prop Trading Platforms – Is There a Difference?

It is evident that the mechanics of the prop trading business are almost identical to regular retail trading. So, there is no surprise that 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 not quite fit. Take this Demo/Live account issue: props that are notoriously famous in the press lately, run their businesses on trading platforms that offer Demo/Live accounts segregation, which was originally how a regular CFDs broker would solicit clients. They would start with a Demo, evaluate the number of instruments and spreads, prior to opening a Live account.

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👉 https://t.co/n2XCQ1Evbv#PropTrading pic.twitter.com/zyT72fUC80

— Tools for Brokers (@Tools4brokers) September 14, 2023

In the current form, props can keep the clients on Demo accounts, so the clients trade in a synthetic/virtual environment, which is just a fancy new name for paper money trading, or good old Demo accounts. Whether those firms have a prop account that hedges traders who passed the competition is a reincarnation of “are you an A-book or B-book broker?”

The Perfect Storm for Change

The hot question is: does it make sense for the tech providers to differentiate from what MQ is doing? MQ is dropping the props, are you sure you want these clients?

Apprehensive that MQ might possess information that others are not privy to, many started to speculate who (regulators, authorities) approached whom.

However, the upheaval in the industry does not appear to be linked to regulatory actions, as there have been no official comments or rulings from governing bodies. The affected accounts are demo evaluation accounts, with user trades transitioning to regulated brokers upon completing the associated challenges. This industry-wide buzz seems to be a result of MQ's efforts to safeguard its interests. Many prop firms are utilizing licenses from other brokers, enabling them to operate independently from MQ's influence.

Notably, 95% of the accounts are demo, thereby avoiding charges associated with live MQ licenses. Moreover, MQ is wary of potential complaints in app stores, aiming to protect their iOS app and prevent confusion 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 reactions from FTC-like organizations mandating better monitoring and compliance measures.

But people love trading, and where the demand is, the supply will follow. Most probably, props will adapt and become quirky, adopting more unconventional approaches diverging from their current models.

Platform providers have been waiting for such turbulence or tectonic shifts and shouldn’t miss on this. This is a perfect storm.

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 also technical) controls in place, enhancing KYB processes while offering services to all the legitimate props. While opportunists may exploit the situation, this would also happen with traditional FX/CFD trading players.

Our 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 ✅

— Smart Prop Trader (@SmartPropTrader) February 16, 2024

My refrain is the same: similarly to how providers 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 the clients do backdate changes to the trades uncontrollably? Or did you focus solely on firms compliant with reasonable regulations, who demonstrated the signs of credible business practices? Or did you follow different paths? The principle applies universally. In my books, it is no different with the props.

Hurray to More Competition

But, there’s more to it than that. Many predatory providers dream of this scenario: a rare chance to push the falling one. To be frank, we are very far from calling MQ “falling”, but it is a great chance for many to secure better positions in terms of market share. A chance to put their best foot forward and showcase their product and services, and finally, to create fair competition for a better evolution of the trading industry, perhaps, to even challenge the monopoly that's grown too comfortable in its seat of power.

Source: LinkedIn

I’ll be promoting the idea of embracing multiple platforms, considering proprietary solutions, and refusing to be cowed by the specter of MetaQuotes' monopoly. Obviously, there has to be full disclosure that one of Devexperts’ products, DXtrade, competes with MT5. I also worked at Spotware Systems and participated in the launch of its cTrader suite, so I’m rooting for both cTrader and DXtrade.

Buy vs Build (or Both)

However, I would like to reiterate an idea that 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 that dreams big would like to conform to the rigid standards of a standardized trading platform provider for long. We’ve seen brokers complain about how easy users switch between brokers because the instruments and the technology are identical and everybody ends up competing on the spreads and eating up the profits.

This scenario mirrors the dynamics of a perfectly competitive market, where profitability diminishes.

So, some of you will want to differentiate, and that will mean differentiating the UX, too. Then, you will need a custom trading platform, and you know where to find us.