Bridges have evolved to modern multi-component systems from a basic connector between MetaTrader 4 servers and liquidity providers. They are just a few features shy of being an actual trading platform for the fintech market. Despite that, brokers still prefer MetaTrader 5 gateways for connecting to a liquidity provider since they are traditionally perceived as manageable, reliable, and simple to use. In fact, gateways convincingly compete with bridges when it comes to market connectivity.
Technically speaking, gateways are mere plugin-like programs installed on a MetaTrader server. They have a two-part mechanism. Once the broker creates a trade, it goes to a gateway through a routing rule without processing the data. It directs a trade to the Liquidity Provider and sends a response from the counterparty back to the platform. Hence, a gateway involves two elements MetaTrader 5 and a liquidity provider, which create a simple and reliable communication process. This operational transparency plays to its advantage. The technology not only restricts technical risks but also helps users quickly trace errors and the root cause of a problem during emergencies.
Similarly, symbol configuration for gateways, which is carried out via the MetaTrader interface, is also transparent. It requires a broker to map symbols from a liquidity provider with an existing list of instruments on the trading platform. On the other hand, liquidity aggregation is handled by MetaTrader 5 itself. For example, brokers can connect multiple quote sources to ECN symbols for allowing the platform to execute trades at the best price in the market. Brokers can also use ECN symbols in another way. They can use one gateway to display real-time quotes and another LP to execute a trade.
MT5 gateways are clear winners over bridges in their ability to place pending orders directly on the market. This feature is critical while trading stocks, as definite real-time quotes for the stock market can be costly. That is why most brokers like to stream indicative prices and interact with the LP-only during trade execution. In contrast, bridges can delay trade execution since they are capable of processing trade requests only. As quotes on the platform are different from the actual market prices, by the time the price equals the quote on the trading platform, liquidity for that order on the market might not be possible. In other words, unlike MT5 gateways, bridges don’t respond to a pending order until executed on the trading platform.
Gateways and bridges perform differently during emergencies. While bridge systems do have in-build risk management tools, they do not guarantee a prompt response during infrastructure breakdowns and often need manual reconfiguration. In contrast, MetaTrader 5 gateways have internal risk mitigation scenarios on the platform, which is capable of handling crucial errors like a live trading server crash. In such cases, the MetaTrader 5 platform promptly switches to a backup instance and updates all corresponding IPs for the history server, which operates gateways. It allows brokers to focus on fixing the root cause instead of worrying about missing trade requests or quote freezes. Similarly, with the MetaTrader cluster, there is no need to reconfigure an old gateway or implement an additional one since MetaTrader can connect existing gateways with new live trading servers.
Only in some exceptional situations will a broker need a more comprehensive solution than a gateway. These include:
- If a company operates with various trading platforms, such as MT4 and MT5
- A request to process some risks internally while hedging trades partially to an external counterparty
- A broker wishes to get advanced exposure along with execution analytics.
In all the above scenarios, a three-part model “trading platform-bridge-liquidity provider” can replace two-part liquidity. It will then allow the bridge to operate as a mediator that links several platforms, generates detailed reports, and performs hybrid execution.
In essence, both bridges and gateways help brokers connect a platform with a liquidity provider. However, brokers often have additional requirements unique to their business models. Do brokers offer clients stock trading option? Do they work with various liquidity providers? How do they process trades: on a-book, b-book, or through hybrid execution? How many MetaTrader servers do they have? Do they need detailed trade analytics? All these unique business conditions precede the topic of this article — “why do some brokers prefer gateways over bridges?”
To conclude, the preference of any technology always depends on the business needs. The goal of any trading technology is to meet the broker’s idea and make mundane processes easier and more comfortable. That said, even the most viable idea cannot
be perfectly executed without the assistance of high-quality software. Therefore, it is critical to assess the business requirements and find a suitable technology provider that is not just reliable but can turn that idea into a reality.