Forex Brokerage: A Conclusive Guide

Trillions of dollars worth of transactions take place on the Forex market every day, and the opportunity for significant gains is attracting a growing number of traders. Many people have recently started their own Forex company due to the tremendous opportunities presented by the Forex industry.

Comprehensive research is essential for establishing a proper functional firm efficiently. Also, You must have sufficient knowledge to be fully prepared, starting from assessing and selecting the ideal location for your brokerage to calculate the first-year operation expenses.

This article will feature the vital steps of launching a Forex brokerage. There are two main ways of setting up your Forex business:

1) To establish it from scratch

2) To start it with White Label solutions

We will discuss the following actions involved in each launching sector.

Brokerage Formation From Scratch

The best benefit of starting a brokerage from the ground up is keeping all the money and having complete control over the business. However, the procedure involves a significant amount of time, stamina, and resources.

The following are the steps you can take to start your brokerage company from the ground up.

1) Assess and Study Your Target Region

It is essential to have a well-defined target demographic. Once you have compiled a list of your potential customers and where they come from, it would be much easier to decide the best jurisdiction to register your brokerage firm.

The criteria for Forex licensing vary by region, so selecting the proper jurisdiction to register under is crucial. For instance, many traders choose Cyprus because of its tax and legal conditions.

Since registering in Cyprus allows the brokerages access to clients residing in any country belonging to the EU or European Union. However, the regulatory environment is another important aspect that you should consider.

An investor will want to find out whether the company is registered & supervised by the Financial Supervision Authority.

At the moment, Forex brokerages can be regulated by:

1. ASIC – Australian Securities and Investments Commission
2. BaFin – The Bundesanstalt für Finanzdienstleistungsaufsicht (Germany)
3. CFTC – Commodities and Futures Trading Commission (United States)
4. CySec – Cyprus Securities and Exchange Commission
5. FCA – Financial Conduct Authority (United Kingdom)
6. FFMS – Federal Financial Markets Service
7. FINMA – Swiss Financial Market Supervisory Authority
8. FMA – Financial Market Authority (Austria)
9. FSA – Financial Services Agency
10. FSB – Financial Services Board (South Africa)

There are many more regulatory bodies countries-wise; the above mentioned are the top regulators.

For a better understanding, we are explaining how to get a forex brokerage license in the USA.

Your business must register with an NFA (National Futures Association) & the CFTC (Commodity Futures Trading Commission) to get a Forex license in the USA.

Getting a Forex license in the US means registering with NFA as a Futures Commission Merchant.

A futures commission merchant (FCM) is an entity that solicits or accepts orders to buy or sell futures contracts, options on futures, retail off-exchange forex contracts or swaps, and receives money or other assets from customers to support such orders.

To register as an FCM and become an NFA Member, a company must complete these six steps:

1. Designate a Security Manager to obtain secure access to NFA’s Online Registration System (ORS).
2. Complete an online application form.
3. Satisfy compliance requirements for FCM applicants.
4. Complete online Annual Questionnaire.
5. Pay a non-refundable application fee of $500.
6. Pay non-refundable FCM membership dues.

FCM membership dues for a retail foreign exchange dealer are $125 000 for an initial setup plus $125 000 to $1 000 000 annual fees, calculated based on your gross yearly revenue.

The commission is much lower for an individual Introducing Broker and equals a $750 initial setup fee and $750 annual dues. An Introducing Broker firm must pay $2500 respectfully.

According to NFA, any Forex broker that accepts US clients must register with the Association. That’s why many brokers prefer offering their services to people from outside the US to avoid complex and expensive procedures.

(*Figure of fees amount may change as per the change of regulation)

You’ll also need to establish institutional relationships with several parties necessary for your business. Some examples are corporate banking solutions, payment gateway services, wire solutions, hosting services, and much more.

Before making a decision, it is essential to compare these various authorities. Analyze, compare, and evaluate multiple jurisdictions before settling on the one you think is best for your brokerage.

2) Ensure You Have Enough Start-up Capital

Without sufficient finances, no company can manage its initial operating expenses. As a consequence, it is essential to understand the jurisdiction’s minimum capital requirement.

Make sure you have enough funds to cover your costs, particularly in the first year of business.

3) Partner With a Liquidity Provider

Interacting with leading liquidity suppliers is critical for more straightforward trades and more efficient prices for your customers.

Since offering leverage to your customers is a part of your business, it is wise to work with a reliable and trustworthy Forex liquidity provider who has direct access to all Tier-1 Forex liquidity markets.

Choosing a valuable & trustworthy liquidity provider is a significant step before creating a new forex business.

The main features of liquidity solutions are:

1. Pricing: The probability of earnings is higher if you can obtain tight spreads. You can become more competitive on the market and cut off trading costs if the spreads are tighter.

2. Credibility: If you are planning to enter the forex market, you should schedule an association with a trustable liquidity provider.

A long-term agreement & relationship always matters. However, a company’s reputation & reliability are the main subjects on which you need to focus. Choosing an unstable partner that might go out of business may cause you many problems and inconveniences.

4) Link With Reliable Payment Service Providers

Your brokerage company should select the best payment processing providers for your clients to make different deposits and withdrawals as efficiently as possible.

After determining the target demographic, choose payment options that are the most well-known and commonly used by customers. Consider working with various payment systems to double as a substitute if the payment processor fails or malfunctions unexpectedly.

As you will be dealing with money night and day & the first thing your clients/forex traders are going to do before or after signing up with you is depositing the money into their trading account. They are going to make withdrawals as well occasionally.

You need a Payment Gateway that helps you manage the deposits and withdrawals as per your target clients. You must have researched their preferred payment mode like Credit Card, Debit Card, Bank Transfer, PayPal, Neteller, Skrill, and much more.

5) Get a Reliable Forex Brokerage Solutions Provider

Launching your brokerage operations involve Forex broker website development, selecting which trading platform to use and what more services you need to incorporate.

Setting your brokerage in motion requires Forex broker website development, assessing which trading platform is suitable and what additional services must be incorporated.

Since building a brokerage from the ground up requires various plugins, program integrations, website development, and other tasks, you should partner with a reputable Forex brokerage solutions provider.

It is critical to get linked with a reputable firm that specializes in Forex and provides necessary solutions for your company. For example, your company needs support for your brokerage’s backend and front-end development and other services.

Brokerage solutions will help you save time and lessen your workload. They provide CRM development, website development, Forex licensing, regulatory assistance, and other services.

Investing in such solutions would enable you to provide better service to your customers and ensure your success.

6) Establish a Brokerage Office

You’ll also need to set up a physical office with IT and accounting personnel, sales and marketing departments, and client support for the complete operation of your brokerage.

If a physical office is out of your budget, consider a virtual office and enter the new Forex brokerage startup bandwagon.

It is also essential to establish an online presence. Nearly every modern business needs a good online presence, and in the Forex market mainly, this is essential. Trading is executed online, and the same applies to client registration, verification, and even depositing.

The best advice here is to subcontract to a company that has experience developing sites for Forex brokers. Otherwise, you risk spending a fortune on a webpage that does not convert visitors into clients. Instead, better opt for a tried and tested format, at least initially.

This step can be undertaken parallel to setting up a company and going through the regulatory process. Usually, brokers tend to start with a light ‘Beta’ version of the website and gradually update it with additional functionality and value-added features.

7) Test Before Going Live

You must thoroughly test your brokerage before availing it to the traders. Use a focus group or seasoned reviewers to review and test your applications thoroughly.

You will spot any problems or glitches before going live with the product, preventing any customer dissatisfaction. Then, when you have completed these measures and have a solid marketing plan in place, you are ready to go live.

Factors to consider for soft launch –

• Give early access to some pro-traders to test everything rigorously
• Profile creation and edit
• Deposit & withdrawals
• Funds credit to the trading account
• Live price feeds speed and accuracy
• Order Placement & Execution
• Account opening
• KYC (Know Your Customer)
• Slippage, Swap, Spread, etc. accuracy
• Promotional campaign analytics to assess what’s working and what’s not
• The website is fully updated with all packages, charges, terms and conditions, disclaimers, etc.
• Incentivizing traders with some rewards like Currency Balance for Trading Account.

If you want to start a Forex brokerage with a sales strategy, White Label options are the way to go.

Starting a Forex Business by Using White Label Solution

A White Label solution is a Forex brokerage service that has been thoroughly tested, thoroughly inspected, and proven reliable.

One of the significant benefits of White Label options is that you can easily overcome technical problems, detailed compliance specifications, and ongoing upkeep.

White Label helps individuals to start their own Forex brokerage in a short period and eliminates the market’s entry barriers. In addition, since there are no capital expenses for processing trading activities, it has reduced operational costs.

With a White Label approach, you can meet your clients’ Forex needs and provide trading services under your own brand. You can also customize the user interface and create your own logo, allowing you to build your own identity and be recognized by millions of traders.

You can also set your own billing system and spreads to increase your earnings. Such solutions are available from every reputable and trustworthy Forex solution provider.

What Services Do Forex Solution Providers Offer?

Some companies specialize in Forex, offering turnkey solutions to help you operate your Forex brokerage and brand. The valuable services most of them provide are discussed in the following:

Company Formation Assistance

The service provider will assist you in quickly registering and launching your brokerage hassle-free.

White Label Solutions

Obtain an MT4/5 license quickly and conveniently through the solution company, and trade with ease.

CRM & Brokerage

Many Forex solution providers deliver robust CRM, especially for FX traders, along with multi-level IB control, KYC, dynamic monitoring, and other features. In addition, some Forex CRMs often provide back-office tools to help you handle your brokerage more efficiently.

Forex Risk Management Software

From some turnkey solutions providers, you will get specialized software that helps you evaluate the risks of trades and, in turn, assists you to steer clear of them or be prepared to tackle them. They do this by offering clear maps, graphs, and indicators.

To start a successful Forex brokerage, you will need to complete various tasks and have an appropriate budget. However, following the measures outlined above would make starting a new Forex company smoother and less intimidating.