And why exactly is MetaQuotes banning a major source of volumes to brokers running its MT4 platform?

In what still seems like a very strange story, MT4 developer MetaQuotes sent out a missive to brokers running MT4 trading (that is, virtually every FX broker out there, big and small) to stop allowing access of popular FX social networking and copy trading programs to MT4 client accounts. As first reported by ForexMagnates, specifically included in the ban were popular copy trading companies ZuluTrade, Tradency, Tradeo, and Myfxbook.

Why strange? Because these copy trading programs generate a healthy stream of trading volumes to brokers, who pay MetaQuotes a lot of money for their MT4 server licenses. And many have been operating like this for years.

MetaQuotes stated reason for the ban? It considers these “third-party developers” to have hacked MT4’s network protocols, violating end user license agreements and terms of contracts with brokerage companies. It should be noted again that some of the older copy trading programs out there have been operating this way, with the full implicit blessing of MetaQuotes, for years. So why suddenly ban copy trading now? And who is going to get hurt the most?

Last question first — who gets hurt. Among the list of copy trading companies listed — ZuluTrade, Tradency, Tradeo, Myfxbook — we believe that the least affected will be Tradency. Virtually all the other copy trading programs listed — ZuluTrade, Tradeo, and Myfxbook, and others — run entirely (or almost entirely) on MT4, such that if the ban is actually enforced (another issue altogether) these companies would have to move their clients over to trade with brokers running other leading platforms, such as Leverate, X Financial Solutions, or ACT Forex — or brokers having their own proprietary platforms. Even if they can move a good percentage of their clients away from MT4, not all clients are going to stop using MT4, and in the interim these copy trading companies are going to lose a lot of volume.

Tradency will also be affected — and has indeed formally announced that it will “cease operation with MetaQuotes systems, shifting Mirror Trader brokers to [other] various currently available proven solutions.” But Tradency today relies a lot less on MT4 than do ZuluTrade and the others, with less than 50% of their volumes coming from MT4 traders (we estimate about 30%). Tradency has a global deal with FXCM which shouldn’t be affected, and also a large Mirror Trader presence in Japan, most of which involves non-MT4 trading.

Benefiting here will likely be the leading independent FX platform providers such as Leverate and X Financial Solutions. All brokers wanting to allow copy trading from these popular products will need to be running something other than MT4, and these platform companies are likely to see demand for their products increase rapidly.

MetaQuotes itself will be hurt, if this indeed causes over time a decrease in the amount of general traffic on MT4. So why then is MetaQuotes really doing this? We’ll cover that in a separate upcoming article. Stay tuned to LeapRate….

For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.