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The following guest post is courtesy of Adinah Brown, content manager at Leverate.
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2016 statistics cited by OECD.org show that worldwide trade in fake goods is worth nearly half a trillion US dollars per annum. This translates into the fact that 2.5% of all global imported products are counterfeit. The countries whose goods are hardest hit are the US, French and Italian products.
Furthermore, a 2016 report cited by the WorldTrademarkReview.com shows that China is the top producer of fake goods. In fact, the country produces about 86% of the world’s counterfeit goods. Consequently, China is well-known as the heaven of fake. For example, you can purchase the latest fake Louis Viton purses at a quarter of the price of the genuine item. But, the worst part is the quality is almost as good, in some cases more so, than the authentic product. Not surprisingly, it is often tough to distinguish between the counterfeit and the genuine article.
MT4: The dangers of the technological counterfeit product
Unfortunately, not only physical goods are counterfeited in China, but notable computer software applications are also at risk of being copied and sold as the original product. One such product is MT4, the industry standard in financial market trading software. One industry journalist correctly noted that “non-genuine, pirate versions of the MetaTrader 4 platform are in widespread existence all across mainland China.”
However, while many believe this development is a good thing for Western firms, not everyone agrees. Fake MT4 products are continually being developed in China and sold at very low prices. Consequently, the current market share consists of thousands of brokers and traders. Furthermore, it stands to reason that low-priced counterfeit software comes part and parcel with five significant challenges that brokers cannot and should not ignore:
Stability and technical support
It is vital for all online trading platforms, such as MT4, to be stable and reliable software applications. Poor stability translates into a poor user experience. Which in turn translates into unsuccessful and frustrating trading. Elements such as reduced connectivity between the client- and server-sides, lack of access to trading instruments, and the high risk of being hacked are all part of an unstable system due to the inferior quality technical support. Ultimately, this untenable situation will result in the loss of customers, an unfeasible risk, in this highly competitive industry
Regular software updates
The reason why the non-counterfeit version of MT4 is the industry standard trading platform is because the developers continuously strive to create a better user experience, fix small bugs, and do their best to meet both the traders’ and brokers’ requirements. It stands to reason that fake MT4 developers cannot (and will not) spend time improving their trading platform. They are also unable to integrate third-party tools with the counterfeit product. Therefore, the counterfeit MT4 is not able to meet market’s developments and thereby, broker’s needs.
Nowadays, substantial amounts of information are available to Chinese traders and MT4 developers via mainstream media and different social channels. The market is also becoming more transparent which allows the fake product developers access to information which they use to market their products under pretences.
The good news is that traders can quickly determine whether a broker is using an original MT4 version by checking on Metatrader4.com, whether their broker is listed, and thereby using the authentic or fake version.
The counterfeit MT4 platform cannot connect directly with the MT4 ECN Bridge; therefore, brokers cannot access interbank foreign exchanges markets directly. Consequently, brokers who purchase the counterfeit product can only offer the B-Book Forex trading model. Essentially, brokers are forced to keep all trades in-house, betting against the trader and increasing the risk of losing money and traders.
Compliance and regulation
There are persistent rumours that brokerage firms who use one of the fake MT4 versions are now being put under extreme pressure by one or more of the world’s financial regulatory bodies as well as the Chinese business crimes investigation units. Practically, the Chinese investigative groups are forcing counterfeit MT4 developers to shut down their operations. This then puts pressure on brokers who are dependent on the fake MT4 software for their livelihood. Finally, brokers who sign up with the false MT4 trading platforms are also at risk of being charged with fraud and copyright.
Based on the above information, it makes sense for brokers to avoid using the counterfeit MT4 as a basis for their online trading platform. The short-term cost savings might make it seem worth the risk, however, the long-term prognosis for a successful business is very poor.