Prop Trading and MetaQuotes: Funding Pips Case May Mark the End of MT Access to US Clients (2024)

MetaQuotes, the company behind the popular trading platforms MetaTrader 4 and MetaTrader 5, is cracking down on prop trading firms. In its latest move, the technology company has forced Blackbull Markets, which was grey-labeling its MT5 license to prop trading firms, forced the broker to terminate its services to Funding Pips.

Crack Down by a Technology Provider

Although MetaQuotes did not publicly confirm its move against prop trading firms, Blackbull’s Chief Business Development Officer, Anish Lal, told Finance Magnates that the broker was “forced to immediately shut down Funding Pips as a client.”

The CEO of Funding Pips, who goes by the name “Khaled” on X (formerly Twitter), confirmed that it was the push of MetaQuotes that forced Blackbull to terminate its services to the prop trading firm. He further pointed out that MetaQuotes' decision came “due to active US accounts.”

“Today, MetaQuotes decided to abruptly halt services due to active US accounts, with no prior notice,” the CEO of Funding Pips wrote. “[Blackbull Markets] didn’t terminate our partnership, but they were forced to let us go, or they would have lost their license, as you all have seen today, they got delisted from the app itself, hopefully, they come back. I got nothing but that best to talk about them."

Blackbull, like a few other brokerages, took advantage of their MetaTrader license and grey-labeled them to prop trading companies. As confirmed by Lal, the broker only allowed Funding Pips to operate on its “demo servers via MT5.”

Due to the pricing structure of MetaTrader licenses, MetaQuotes does not receive fees for using its demo services; it only charges for using its live servers.

When it comes to prop trading firms, most of them only offer simulated trading on demo servers to their clients, even the ones that passed the challenges. Based on their risk assessment, the platforms then copy the trades on a live server and split the profits with the traders as payouts. Under this model, MetaQuotes does not generate any revenue as activities are on demo servers.

The two Metatrader platforms are very popular regarding leveraged forex or contracts for differences (CFDs) trading. However, MetaQuotes has been too opaque in its licensing policies. It even tightened its licensing policies for offshore brokers. However, grey labeling of its licenses allows brokers to offer the MT4 and MT5 platforms to other companies, which MetaQuotes otherwise would have denied.

“We’re unfortunately in breach of our grey label license ability to offer this for prop firms, so we’re forced to immediately shut down Funding Pips as a client and their server on our Demo environment,” Blackbull’s Lal said.

Finance Magnates reached out to MetaQuotes but received no response as of press time.

Other than Blackbull Markets, Purple Trading, another broker grey-labeling its MetaTrader licenses, also terminated its services to the prop trading firms earlier this week. While Blackbull’s actions only affected one known prop trading platform, Purple Trading offered services to several prop trading firms, including Funded Engineer, AquaFunded, Goat Funded Trader, The Funded Trader, Skilled Fundended Trades, and others.

Meanhwile some self-claimed traders on X are taking the compliance drive positively. "Though some oppose regulation, a framework in the space can be beneficial. At least could ensure integrity and maintain stability," the twitter handle 'TraderBach' wrote.

The US Clients Are Off Limits

The United States' regulators are very strict regarding leveraged trading services for retail traders. The offering of CFDs is banned in the country. However, prop trading firms operate beyond any regulatory scope.

Prop trading firms never take clients’ money for trading or investment: they only sell trading “challenges” for a fee, and if traders successfully pass that challenge, then they can trade with funds provided by the prop trading platform. If there are any profits, the prop trading company will split that with the trader.

Many firms target US clients because prop trading platforms are technically not regulated in the United States. According to a Finance Magnates report, about a third of these companies are registered in the US. However, the industry became cautious after the US commodities market regulator sued My Forex Funds, alleging fraud, and shuttered its operations overnight.

According to the CEO of Funding Pips, MetaQuotes' concerns revolve around onboarding US clients by prop trading. Funded Engineer, which lost the services of Purple Trading and onboarded Blueberry Markets as its partner, specified that it would not be able to offer services to US citizens and residents.

“We have already obtained a forex license as well as a MetaQuotes license, which will allow us to continue offering MT5 services to all clients except USA citizens and residents. Rest assured, we are actively working on a solution for our USA-based clients as well,” a post by the company on X noted.

“In regard to USA citizens, it's important to be transparent. MT5 services for USA citizens and residents will soon be discontinued, not only for us but for the entire prop industry, within the next 2 to 8 weeks.”

The MetaQuotes move indicates that the company is very cautious when it comes to offering services using its platform to US clients. The two MetaTrader apps were banned on Apple's App Store in 2022 for their alleged use by fraudsters targeting the US citizens and residents. However, both apps were restored after a few months.

"I understand the restrictions that apply to the USA, but the decision to obligate brokers to revoke licenses from prop firms suggests to me that MetaQuotes may have grown weary of them reselling their tech. They might negotiate direct licenses without third parties," DezziFinance wrote on X.

Although the Funding Pips’ CEO said that it has active US clients, its website now shows the US, the UAE, and Vietnam as three restricted countries.

Meanwhile, a Miami-based prop firm, Top Tier Trader, has recently extended the list of its restricted countries, adding Germany, Vietnam, India, the United Kingdom, and several others.

While MetaQuotes forces brokers to stop services to prop trading platforms, its competitors are taking advantage of the situation. Earlier, Devexperts launched trading platform solution dedicated to prop trading, while several other technology firms have launched prop trading tech.