Gearing up for the Future - Harnessing the power of customised development services for the MetaTrader 5 Platform

Since MetaQuotes added hedging features to its MetaTrader 5 (MT5) platform last year, the FX industry is increasingly seeing the transition from MT4 as a viable, if not vital, option. But just how are leading technology vendors supporting this move and what is driving the development of MT5 toolsets one year on? Nicola Tavendale writes.

First Published: e-Forex Magazine 77 / FX Brokerage Operations / September, 2017

Because the active uptake of MT5 by the forex market only truly began after the introduction of hedging functionality in March 2016, technology providers have in effect only had around a year in which to start developing solutions aligned for the new platform. And that really is not very long at all when it comes to the complex fintech products needed by the forex market, such as gateways, percent allocation management modes etc, says Aleksey Kutsenko, CEO, Tools for Brokers (T4B). “The main challenge for developer companies - and brokers wanting to adopt the platform - is that a whole ecosystem, which was developed over many years, now needs to be completely replaced in such short timeframes,” he explains. “In addition, technology solutions for MT4 were also being actively developed for over a decade and so standards across the industry are really high, with a number of superior technical features available.” 

Kutsenko warns that this has resulted in a so-called ‘commodity trap’, in which clients now take these standards for granted and are only interested in looking for pricing advantages. Broker expectations of what MT5 solutions can offer are also soaring, he says. “And they need to be fulfilled, otherwise all the resources spent on development would be wasted.” In addition, the number of leading providers in the market currently offering MT5 solutions is still relatively small and the product range remains more limited than that available for MT4. According to Tom Higgins, CEO and Founder of Gold-i, there are two key factors behind this variation. “Firstly, the APIs in MT5 are completely and utterly different to MT4,” Higgins explains. “There is a much larger API set so you can do many more things with it – but they are completely non-backwards compatible.” 

Effectively, this means that nothing which has been previously written for MT4 is in any way usable if it is written directly as a plug-in, he adds. “It requires everybody to do major rework and actually rebuild from scratch everything they’ve already done,” Higgins says. Secondly, MT5 also has a lot of built-in functions that MT4 does not, such as order routing and the concept of a liquidity provider and external execution. “There are some things that are just not needed because it has a lot of these things already built-in,” Higgins adds. “You have to completely redesign your systems.”

Aleksey Kutsenko

Aleksey Kutsenko

“The main challenge is that a whole ecosystem, which was developed over many years, now needs to be completely replaced in such short timeframes,”

Ring the changes

Prior to the mass adoption of MT5 by leading brokers, Plugit was one of the first technology providers to predict the trend direction “At Plugit, we had anticipated the surging demand for MT5 solutions and decided to allocate more resources to MT5 development” says Jalal Faour, CEO of Plugit Apps. “We had developed a wide variety of successful MT4 solutions to bridge the gap between brokers and the system and even though the MT5 had filled some of those gaps, we knew that the demand for new MT5 compatible solutions would never cease. According to Faour, the wide array of MT5 compatible solutions includes the newly designed MT5 MAMM, Affiliate/IB Portal, CRM, Bonus Automation and Dynamic Leverage. “Having added MT5 compatible solutions into our existing portfolio, we are constantly striving to add more products to address the ever changing and sophisticated requirements of MT5 brokers” concludes Faour.

And yet, the recent sustained demand for MT5 within the retail broker community has resulted in a renewed interest in providing a wide variety of tools for the platform, Andrew Ralich, CEO at oneZero Financial Systems, argues. “As expected, bridging platforms, MAM utilities and other ‘standard’ components of the typical MT4 environment have all started popping up for MT5,” he says. But an area of particular interest internally at oneZero, adds Ralich, are the emerging tools which address new functionality demands specific to exchange trading and non-FX products, all developed exclusively for MT5.

“To my mind, the biggest opportunity for fintech suppliers here is also MetaTrader’s biggest challenge,” adds Paul G Smith, CEO of Mobile Trading Partners (MTP). “If brokers are being asked to change from MT4 to MT5, it is an opportunity for them to add or change to a competing platform. It’s still a migration.” It all requires adjustment and change for both the broker and their clients, Smith explains, adding that MTP’s business model is somewhat tangential to MetaTrader anyway. “None of our products depend on MT4 or MT5,” he says. “Our trading apps, web trader and charting products are all entirely platform agnostic – but many of our broker clients depend on those platforms. And of course, we build and deliver compatible solutions for them.”

Jalal Faour

Jalal Faour

“Operating our solutions is not restricted to brokers, it encompasses other stakeholders such as IBs and Money Managers who in turn can have their own access to pitch, manage and retain their own clients. This could potentially increase the customer base and trading volume.”

Avoiding pitfalls

As a result, Mobile Trading Partners supported many of its client when they worked with MT4 and, according to Smith, will continue to do so as they move to MT5. “We have created APIs and web services to support mobile and web trading, charting and reports,” he adds. “These are compatible with MT4 and we’ll continue to support them with MT5.” At this stage, most technology suppliers will already have started converting their plugins for MT5, but Smith observes that they are by no means all equally well advanced in that process. “Also, some older plugins will be left behind and orphaned, the original developers have moved on or lost the skills - so brokers cannot assume that they can replace like-for-like as they upgrade to MT5,” he warns.

Kutsenko agrees, adding that there are also examples of obsolete products such as the one-click trading panel, which is now included in the platform by default. In fact, the only difference with the MT5 product range is arguably that it is much narrower at the moment. T4B’s MT4 product portfolio, for example, consists of some 80 solutions. However, T4B also plans to grow its MT5 products suit in organic way, ie by fulfilling orders for custom developments, Kutsenko explains. “We have already released a portfolio of our flagship products, such as risk management solution, PAMM, affiliate system, web API and couple of automation tools. Moreover, we are launching two major cross-platform developments - business intelligence solution and MT4/MT5 bridge of new generation.”

There are also quite a lot of infrastructural issues that brokers have not really thought about with MT5, Higgins warns. “Because it carries depth of market, it can take a lot of internet data so brokers need to make sure they have the right level of infrastructure, the right specifications against the server, the right specification of internet performance and capacity etc.” he explains. Depth of market on a data feed can increase the amount of data by about 10 times, according to Higgins. For that reason, he expects that many brokers will use professional IT providers, rather than manage in-house.  

Opportunities for growth

The other issue which is a real problem with MT5, because it can do more things, is data, Higgins adds. “Because MT4 wasn’t really aimed at equity markets, the idea of having to pay for data - which is normal in the exchange world but not in the FX world - is a bit of a conundrum for some of these brokers.” This is a significant problem for brokers, who will need to factor in the cost of this data if they wish to provide equity trading. “It is a serious, serious issue,” he says. “The exchanges are working on this concept and their pricing models need to change to offer a retail broker pricing model.” 

But if a broker wants to scale up their business, it is much easier to do with MT5 than MT4, claims Higgins. “The cost of operation for a larger broker is much less on MT5 than on MT4, because they don’t have multiple installations and they can have a larger, clustered version of MT5,” he explains. And it does appear that, so far at least, the dominant third-party providers who ‘got it right’ for MT4 are also emerging as solid options for MT5, Ralich claims. “But as with any new market, it’s important to avoid ‘flavour of the week’ or ‘too good to be true’ offerings from technology providers who have yet to demonstrate the ability to scale their operations, software and client base on a proven model,” he warns. 

So how can plug-ins help brokers to extend the business opportunities presented by the MT5 platform? Just as with MT4, MT5 will represent the core of an ecosystem of compatible products and services, according to Smith. “Plug-ins and API integrations are essential to hooking all these pieces up,” he adds. “In addition, while MetaTrader’s products are complete and self-consistent - and work very well - they don’t cover everything a broker needs, not by a long shot. And some aspects of the platform even actively serve to frustrate a broker’s needs.” For example, account sign-up and customer retention are the two ends of the customer relationship lifecycle that are poorly handled in MetaTrader’s product, Smith claims. 

Paul G Smith

Paul G Smith

“If a broker doesn’t have their own app in the app stores these days, they are seriously missing out on the opportunities that presents.”

Ahead of the game

“This means that the broker needs to provide some other solution for account sign-up and customer retention; that’s probably the number one reason brokers come to us for trading apps,” he adds. “We deliver something that helps the users - while helping the brokers build and maintain their business.” Mobile Trading Partners achieves this by providing additional features and benefits alongside the MT5 app, Smith explains. These include localised account sign-up and regulatory document upload, all the way through to deep social media integration and direct marketing features. 

“If a broker doesn’t have their own app in the app stores these days, they are seriously missing out on the opportunities that presents,” claims Smith. “MT5 plug-ins and API integrations also provide new opportunities for analysis tools to hook in to what’s going on, both for internal analysis and reporting and for regulatory purposes (MiFID II, anyone?) - which form an important, though less visible, part of our business with our broker clients.” And according to Faour, plugins are essential tools allowing brokers to extend the functionalities of their systems and engage more players such as money managers and Introducing Brokers (IBs) whose relevant applications have been made available on MT5. “For instance, all our solutions can be accessed across different terminals namely web and mobile applications giving users greater flexibility and portability even when they are away from their desks,” he says.

Furthermore, social trading offers investors and inexperienced traders the ability to copy already established traders with proven records by suppressing their fear and increasing their confidence. Faour believes that such applications  could potentially allow brokers to increase their customer base. “MT5 is ideally suitable for such scenarios as it has been designed to accommodate the increasing load resulting from multiple simultaneous trade copies due to the ability of adding multiple trading servers” he adds.

Andrew Ralich

Andrew Ralich

“It’s important to avoid ‘flavour of the week’ or ‘too good to be true’ offerings from technology providers who have yet to demonstrate the ability to scale their operations, software and client base on a proven model.”

Defining ‘essential’

A further opportunity for technology vendors lies in the development of liquidity bridges for MT5 – utilising a key feature unique to the new platform. “Depth of market is so important in liquidity aggregation, because if you just have top of book then you don’t know where you can go to fill - so you end up with an incorrect price,” explains Higgins. “With MT5, the end user can see the depth of each level.” He adds that Gold-i’s Matrix product fits in with MT5 particularly well, due to the trading concepts used by liquidity providers, such as positions and trades. “For us, because of the way we choose to implement it, it has been really quick to do MT5 liquidity aggregation,” he explains. “We built an MT5 adapter to connect to our bridging technology - so immediately all of our 70+ liquidity providers which are available on MT4 are also available for MT5. I believe that through our MT5 Gateway we offer access to more Liquidity Providers on MT5 than any other provider.” 

However, there is not a ‘one-size-fits-all’ solution when it comes to plug-ins for MT5, warns Kutsenko. And since every broker wants to stand out from competition in this saturated market, there is strong demand for individual solutions developed according to specific needs of brokers, he adds. “Custom development services have become extremely popular among MT4 brokers, so I believe they will remain much in demand,” he says. “Moreover, sometimes a broker’s unique selling proposition is based solely on the solution behind it, for example, a special bonus system or copy-trading service.”

One further instance in which a plug-in may prove vital for business functions is when regulatory change requires interference in the logic of the platform. For example, when L’Autorité des Marchés Financiers (AMF) issued a new rule that required provision of so-called limited risk accounts, forcing traders to set a ‘stop loss’ for each transaction, T4B designed a solution for this purpose. “Thus, tools helping to comply with tightening regulatory requirements are likely to become indispensable for brokers,” he adds. “I would say that the aforementioned plugins, such as PAMM/MAM systems and gateways as well as risk management tools, have also become an essential toolkit for every broker now.”

Tom Higgins

Tom Higgins

“The cost of operation for a larger broker is much less on MT5 than on MT4, because they don’t have multiple installations and they can have a larger, clustered version of MT5.”

Next big thing

“In addition, solutions for money management are now an integral part of any forex brokerage offering,” Kutsenko claims. Yet despite the demand for copy-trading solutions, MetaQuotes decided not to include it as an in-built feature in MT5, he explains. However, T4B currently offers around 10 different solutions for copy-trading in portfolio, according to Kutsenko, with 90 copies of its multi-account manager (MAM) solution installed worldwide. “Instead, several providers - including T4B - have introduced their money management solutions on the market,” he adds. “According to our experience, in most cases brokers have their own needs and ideas on how their copying system should look like. So we anticipate the emergence of new technologies aligned to this aim.”

The IB market has been increasing in popularity with diverse requirements across different markets, according to Faour. Although MT5 has introduced new commission and rebate schemes, yet it remains a major challenge for brokers and IBs alike to manage their IBs and clients respectively. He adds” Plugit IB Portal has been designed as a multi-tiered engine accessible independently via web yet fully synchronized with the MT5 trading platform. Faour explains, the IB Potal offers IBs the ability to view in real-time all commissions generated from their direct and indirect clients alike. Moreover, IBs have the ability to generate a variety of reports in addition to requesting different types of operations”. The system offers the ability to set up different types of commissions to an unlimited number of IB levels in a flexible hierarchal way. Faour says “Operating our solutions is not restricted to brokers, it encompasses other stakeholders such as IBs and Money Managers who in turn can have their own access to pitch, manage and retain their own clients. This could potentially increase the customer base and trading volume”

Higgins agrees, adding that he believes the next area of growth will be in the area of IB management, rebate management and rebate fee-paying. “But that’s really only popular in China, where IBs are king,” he adds. “So in China, our product called IB Rebate which we have for MT4 is the next thing that we are doing - it is being developed at the moment.” Gold-i’s risk management and data analytics tool, Visual Edge, is another key MT5 product. “It had to be designed differently from MT4, and therefore we needed to build another adaptor for that,” Higgins explains. “It had to understand how to read the data from MT5 as the concepts in MT5 are different from MT4, because it has orders, positions and trades.”

For Ralich, a further important innovation in response to the growing demand for MT5 is the introduction of exchange-traded products - alongside FX/OTC products - in a single bridge or hub solution. “Managing the complexity of both paradigms in a single solution is something our clients have been very excited about, and we’re seeing this is a challenge for other providers to integrate into their systems,” Ralich claims. He believes that this is due to the need for reporting, execution and reconciliation components, specific to multi-asset trading, which can prove to be a significant challenge to develop. “We’re proud to say that oneZero has delivered on this promise to our clients and we are the first provider to be offering a full multi-asset solution with direct exchange connectivity,” he adds.

Facing forward

Smith, on the other hand, argues that liquidity management toolsets should be “first and foremost” in terms of essential developments for MT5, as well as a connection to account management and CRM. “Brokers should always have a separate solution for that, so the broker can truly own their customer relationships,” he warns. “They also need connections to the business-critical risk management and regulatory reporting systems without which no broker can operate.” 

And finally, a huge area of interest noted by Gold-i has been for the MAM Pro for MT5, Higgins explains, “We have a vast amount of experience in MT5 product development and will build on our MT5 product portfolio in response to client demand.” Furthermore, Gold-i’s analytics tool - Matrix Insight - can also provide a ‘real look’ into the quality of the data, the quality of the execution, latency, slippage, where fills are going etc. “This is so relevant in fragmented liquidity markets,” Higgins adds. “It is useful in an FX market, but it is not as key as it is in a fragmented, thin liquidity market like the cryptocurrency world.” 

Looking ahead, Gold-i is also planning to start an MT5 white label service, Higgins says, which is aimed at brokers who want to get into MT5 but who do not want to put all the infrastructure in initially. The white label will be developed this year and will be available in the next few months. In terms of demand, Higgins highlights China as a key area of growth for MT5, due to the number of start-ups which are all opting for MT5 rather than MT4 “because they know they will have to move across anyway”.  “We are basing all of our MT5 build on demand because brokers are constantly changing their requirements and doing things differently,” he concludes. “Brokers don’t really want to go with something too new until it has been proved, but that has now happened and they are taking MT5 seriously and planning their transition from MT4.”