Killing MT4, MetaQuotes pushes MT5’s “empire” worries!

There was a saying in the industry: the chronicle of MT4 is a condensed history of the development of the foreign exchange industry. No matter which platform you choose and what species you like to trade, you cannot do without the support of MT4 platform. And nearly 20 years after its birth, with the emergence of MT5, the fate of MT4 and the future of Medak, is undergoing a profound change.

In this article, we will discuss three questions with traders by looking back at the history and integrating various information from within the industry.

-Why did Mediatek rush to put MT4 out of business?

-Can MT5 really replace MT4?

-What is the future of online forex trading as MT4’s position is tested?

The birth of MT4 and the brilliance of MetaQuotes

The year 2000 was an important point for the Forex industry. In this year, Renat Fatkhullin, a young Russian, and his partners took advantage of the country’s big economic development and founded MetaQuotes Software Corp in Kazan, which later became known to everyone as Medak Software (hereinafter referred to as Medak).

At its inception, Medak set its main business to develop an online forex trading platform. Through several years of hard work, Mediatek grew faster than anyone expected and became the absolute leader in the global forex industry. And all this can be attributed to the number one money-sucking monster of Maidaq – MT4.

Looking back at the history, we can find that the growth path of Midas and MT4 is really enviable, the strict selection of the gentleman here for you to organize a few key points: – 2001, Midas launched the first time in 2001.

-In 2001, MetaQuotes launched its initial trading platform MetaQuotes, which provided simple functions such as data visualization, viewing market quotes, and pioneered the language program compiled by customers themselves.

-In 2003, MetaTraders3 (MT3) was launched to access cell phones and started to capture the market.

-In 2004, MT4 was launched to open up all aspects of online trading – including software trading side/clearing bridge/risk control side/mobile side.

Since its birth, it took just 5 years for Mactac to become the leader in online forex trading, leaving all its peers behind with its R&D capabilities and long-term vision. And MT4 has completed its occupation of the market without much effort – according to Russian media reports, at its peak, MT4 had a market share of 90% and 14 million users worldwide.

The biggest advantages of MT4 are its comprehensive performance, ease of operation, low cost (at the beginning of the launch) and low barrier to use. However, these advantages, which helped MT4 and Mediatek to conquer the Forex market like crazy, later turned out to be the biggest loophole, even forcing Mediatek to make one amazing decision after another.

Multiple factors that forced Mediatek to abandon MT4

As we said earlier, the series of advantages that have helped MT4 capture the global market can be summarized in two main words: convenience. Whether for brokers or for traders, MT4 is the most cost-effective option.

However, in the context of the growing forex industry, new challenges have emerged: more and more shoddy platforms are entering the market with the help of MT4’s east wind, which has pitted one group of traders after another.

At this point, two major challenges came to the forefront of Mediatek and forced it to make changes.

  • First, piracy was rampant and MT4 became a nightmare for many regulators.
  • Second, MT4’s ability to make money was declining and Medak needed to find new ways to increase revenue.

Regarding these two major challenges, let’s analyze them one by one.

For piracy, Midac does not want to control and cannot control

How harmful is the pirated version of MT4? I have summarized the following points for you.

-First, the data is wrongly omitted, not updated and vulnerable to hacking.

-Second, some platforms can not only tamper with the quotes privately, but may even have automatic position closing, automatic order elimination, margin calculation errors and other disclosures, seriously damaging the interests of traders.

-Third, the lack of supervision, no protection, the safety of funds is in doubt.

Did Mediatek not anticipate such a situation of piracy? I don’t think it is possible.

At the very beginning of MT4, Maidaq claimed that the most important feature of this trading program is that it is easy to develop.

From a technical point of view, the small program called EA (Expert Adviser) in MT4 is the programmed trading tool with the lowest development threshold. Since the entire MT4 software system is highly closed, from the trading side to the back office risk control, order clearing, a variety of functions are quite complete, pirate program development is quite easy.

It does not matter if you do not understand the terminology, you only need to remember one thing is enough: since Mediatek has set the tone of simplicity and convenience for MT4, it is inevitable to anticipate that this software will be cracked and copied like crazy. As for the matter of rampant piracy, Mediatek’s attitude is quite contradictory.

On the one hand, due to the rising discontent of regulators and the discontent of traders who are being plundered, Midas must make some response. But on the other hand, if the piracy of MT4 is to be completely eliminated, the amount of manpower and material resources needed to be invested is a matter of consideration.

In 2009, Midac had a key test. Due to the successful cracking by the once in-house developers, pirated versions of the full MT4 system were put on sale around the world at a frenzied pace, with the lowest price point being just about $180 (about 2,000 RMB).

The use of pirated MT4 platform, with low cost to kill the market, the use of regulatory gaps crazy money, not only become a thorn in the side of national regulators, but also to do a good job of risk control in a timely manner Midas to the forefront of public opinion. With such a scenario, the piracy phenomenon has reached a point where it cannot be ignored.
Later, Mediatek responded. Since version 5.0.0, MT4 can only be downloaded remotely from the official Midas server, in order to fundamentally eliminate the proliferation of pirated versions of MT4. But at this point in time, there were more and more problems with the performance of MT4, which made Mediatek think of a complete overhaul. The fee became another trigger for Maidaq to put MT4 in the cold.

Make money, is the eternal theme of the business field

To know the earning power of MT4, we must first know a few concepts.

Main label and white label: The so-called main label is the MT4 software sold directly to the platform by MetaQuotes. Due to the high cost, the platforms that can purchase the main target are generally large and powerful brokers. These customers are also the most important rice class owners of Metaq. As for the white label, it is the technical service provided to other platforms by large traders and technology companies that own the main target.

The fees charged by Mediatek to brokers consist of two main components: a monthly fee and a license fee. Prior to 2017, the service fee for the MT4 master bid was $1,500 per month, while the license purchase fee was $75,000. However, starting January 2017, these two fees were increased to $2,000 and $100,000, respectively.

In addition, the average cost of the initial installation of the MT4 white label is between $15,000 and $30,000, with a monthly fee of $1,000 for the PC and $750 for the APP. As for the cost of other technical services for building white labels for the platform, it is not regulated by Medak and depends on the standards of the main label company and the corresponding features of MT4.

At the beginning of its existence, this set of sales schemes did allow Medak to earn a lot of money, but by about 2009, the company could no longer be satisfied by the current level of earnings.

And in connection with the above mentioned problems, a difficult choice was put in front of Midas: piracy was rampant and white label revenue was bound to plummet, but was it cost-effective to spend a lot of money and resources to combat piracy problems?

Given the fundamental problem with MT4’s design – the ease of replication – the scales seem to be tilting within Midas.

Instead of continuing to tangle with brokers and regulators over the piracy of MT4, it seemed better to show courage and determination and develop a new software that would once again disrupt the industry.

And so, MT5 was born. However, this new flagship product, which carries the high expectations of Midas, does not seem to reach the desired height.

MetaQuotes has done everything in order to force MT5

In 2010, MetaQuotes launched MT5, which added functions to support floor trading and option trading, and continued to optimize its performance in subsequent revisions.

Afterwards, MetaQuotes began a long journey of marketing and upgrading, using all means to bring MT5 to the market, and hoped that this new product could completely replace MT4 in the near future.

From the perspective of MT5’s design and sales model, Midas has learned its lesson and fully utilized all means to solve the two major problems on the way of MT4’s development mentioned earlier.

First of all, the self-compiling language of MT5 client also evolved into MQL5, which was changed from C++, making it very difficult to steal the code and effectively solving the problem of rampant piracy. Since its launch, MT5 has been updated frequently and is stronger than MT4 in terms of security and stability.

Secondly, in terms of pricing, in order to open the market as soon as possible Midas launched three offer levels, according to the number of accounts opened on the platform divided into levels: entry level to provide 1000 accounts; standard level to provide 20,000 accounts; enterprise level 200,000 accounts. The average fee, however, is significantly higher than that of MT4.

But MT5, which carries the high expectations of Midas, does not compete. At the beginning of the launch, the major brokers simply ignored the existence of MT5, only MT4 in their eyes. after the initial setback in the promotion, Midas quickly adjusted its strategy and continued to push MT5 through three big moves.

Move one: speed up the upgrade

The first thing that MetaQuotes does is to upgrade MT5.

In addition to solving the functional defects such as the inability to lock positions in the first version, MT5 has also undergone multiple comprehensive upgrades compared to MT4: In terms of trading varieties, the MT5 platform can not only support foreign exchange and futures trading, but also stocks, options and other transactions.

In terms of tools, MT5 not only provides 8 more technical indicators than MT4 (30 for MT4 and 38 for MT5), as many as 21 different periods are K-line charts, and as many as 17 indicator display forms. After plugging the technical loopholes, MetaQuotes needs some giants to endorse MT5.

In August 2016, MetaQuotes built a new MT5 connection channel for oneZero, helping MT5 become the world’s largest 15 exchanges for stocks, futures and other on-site trading tools. Two giants, Swissquote Bank and LMAX, also entered the game one after another, becoming MT5 liquidity providers.

As of mid-2016, the market recognition of MT5 has increased significantly, and there are about 100 brokers providing trading services on the MT5 platform. However, MT4 still occupies nearly 90% of the market. The slow promotion process made it unacceptable for MetaQuotes, and a new killer move was officially launched.

Move two: abandon MT4 completely

The second big move made by Midak really made the fans of MT4 despair.

In November 2016, Anthony Papaevagorou, head of sales at Medak, announced that it would no longer provide MT4 upgrade services and would focus its resources on developing the MT5 platform. at the end of April 2017, Medak even completely stopped selling the MT4 master standard.

While announcing the discontinuation of MT4 updates, the frequency of MT5 updates has reached about once every 2 months, with many performance issues fixed in the early stages.

You think Midas has done enough? Sorry, people’s big move is not yet finished.

Move three: price rolling

At the beginning of 2017, Medak made an even bolder decision: the MT4 price increase.

On January 1, 2017, Mediatek announced on its official website that, with immediate effect, the monthly service fee for each MT4 server newly used by brokers was raised to $2,000 from the previous $1,500, and the original $75,000 license fee was raised to $100,000, a 30% increase. Some insiders even said that in order to make way for MT5, Mediatek does not rule out the possibility of continuing to raise various fees for MT4.

At the most exaggerated time, MT4’s license fee was four times higher than MT5. This kind of price hike leaves no room for error, leaving brokers with no choice.

Medak executives have revealed that soon after the MT4 price hike, nearly 100 brokers started switching to MT5’s platform, including big clients such as ActivTrades, Just2Trade and NAS Broker.

However, even though nothing has been done, Mediatek has not been able to replace MT4 with MT5.

In the fourth quarter of 2018, nearly two years after the MT4 price increase, the total number of transactions completed by global retail forex brokers on the MT4 platform, as a percentage of total transactions, remained as high as 55%, according to a survey by data analysts Finance Magnates Intelligence Department. And throughout 2018, this proportion has steadily increased, never dropping below 50%.

This shows that although the major platforms and their customers have gradually accepted MT5 from the surface, their loyalty to MT4 remains quite impressive.

Why can’t MT5 replace MT4?

Why does this happen above? We can understand it in two stages.

Initial stage: The initial version of MT5 has many defects and greatly undermines customer confidence

From the brokers’ point of view, they don’t want to let Mediatek’s reach go further and further. There is one major difference between the initial MT5 and MT4: the clearing bridge must use the products of several technology companies certified and partnered by Mediatek. In this way, brokers trading various trading links have to be deeply tied to Midas.

Science time: clearing bridge is a link that transmits MT4 customer orders directly to the counterparty (clearing party, liquidity provider). According to the rules of operation of the MT4 platform, the clearing bridge can place positions within the system directly to the international clearing agency, which is equivalent to the risk transfer of trading exposures.

As we all know, the significance of the existence of the clearing bridge is to ensure the independence of brokers and effectively reduce the operational risk of brokers. MT5’s restrictions on the choice of clearing bridges, on the other hand, allow Midas to successfully intervene in the operational side of the broker, and the former’s control is further enhanced, which is obviously not the result brokers would like to see.

In my opinion, in addition to the issues mentioned above, brokers may be uncomfortable with MT5 due to these considerations.

In addition to acting as a trading platform, MT4 also functions as a community. After years of using MT4, traders and the platform have formed a bond, and most brokers are not sure if they can still form a trading community with a strong atmosphere after migrating their clients from MT4 to MT5.

Secondly, although Midas announced in 2016 to stop updating MT4, and the following year to stop selling the main standard, but the existing customers have no problem using it, Midas still has to continue to solve the various technical problems of the existing MT4 platform – after all, the service fees have increased a lot.

This last point is rather ironic: probably because of the fierce power of Medak, the MT5 back-end design is too complex and many brokers are daunted by it. For both the platform and the trader, it is enough that MT4 has simple and straightforward features and stable performance, while MT5 has so many complicated tools that it seems cumbersome.
From a trader’s point of view, the initial version of MT5 has an unacceptable flaw: it cannot lock positions.
Locking a position generally means that after buying or selling a contract, an investor opens a new position opposite to the original one when the market moves in the opposite direction of his or her operation. Locking a position is a very important feature for many traders, as the system allows them to have multiple positions in a trading instrument at the same time, including reverse positions.

After the push: Escape from Metaq’s control and become an industry consensus

However, as mentioned earlier, Medak has continued to upgrade MT5 in later years, not only fixing functional flaws such as the inability to lock positions, but also providing many upgrades that were not available in MT4.

In 2017, Medak added the Deep Market feature to the new version of MT5, providing information about market liquidity.

In January 2018, Mediatek announced that MT5 implements financial technology service integration features, which allow technology service providers to offer their products or services directly to brokers, strengthening brokers’ capabilities such as multi-asset management and risk control.

In MT5 Enterprise Edition, brokers can install various plug-ins, set up a complete management configuration system, and save all client data on the server.

As of early 2018, MT5 has significantly outperformed MT4 in terms of performance.

However, a new problem came: due to a series of tumultuous operations during the promotion of MT4 by Midas, many brokers were deeply aware that Midas’ influence was too big, so big that it was disturbing.

Since the birth of MT4, Mediatek has been occupying nearly 90% of the industry’s market share, with a clear monopoly advantage. Brokers have enjoyed the services provided by Mediatek, and MT4 has helped the former to grow rapidly, and the partnership is unbreakable – if not for the above series of manipulations. Now, if we let Maidaq continue to dominate, then in the future, if MT5 also raised prices, perhaps Maidaq will have to charge additional fees, brokers simply have no way to fight back.

Why change this situation, the major brokers in the search for new partners at the same time, but also intensify the development of their own proprietary trading platform.

CTrader, a multi-asset home contract trading platform launched by Cyprus-based technology provider Spotware, is the most popular platform for brokers outside of the MT series from Medak. cTrader connects the platform directly to the liquidity provider for use on the NDD platform, promising never to interfere with trading. Because it is easy to use and charges are reasonable, it has attracted a lot of brokers to follow.

In terms of research and development of their own platforms, the major giants have also made breakthroughs.

  • Forex launched Trading Station, which includes all the features of MT4, and can even provide features such as current news information from Forex’s Daily FX.
  • Carlson’s ForexTradeer Pro is aimed at forex traders, offering trading in major currency pairs, cross currency pairs.
  • Anda’s FxTrade is a platform for forex and CFD trading with millisecond execution speeds, with Anda claiming that 98% of its clients’ trades are completed within 0.057 seconds.
  • Brokers such as Saxo Bank, CMC Market, IB, and POSCO have also launched their own platforms ……

Write at the end

Having spent countless efforts to put MT5 on the throne, Mediatek is under enormous pressure. This pressure comes not only from internal but also from external competition: nowadays, it is rare to find a broker that offers only one platform, MT4 or MT5.

The MT series, probably, is getting far from its peak. The predicament of MTK also shows us the truth: the Forex industry has entered a new phase of full competition and monopolies are hard to come by. And for the average trader, although MT4 is still an important platform that is hard to let go of, more and more choices are never a bad thing.

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