How to Start Your Own Forex Brokerage

Ninety percent of all Forex traders lose their full investment within the first few months of trading. The remaining 10% generate regular income, which has to be continually paid for market and transaction services access to brokerage platforms. Regulatory law experts in Regulated United Europe will guide you through how you could establish such an online platform to claim your share in the profits of the world’s largest financial market.

Structure of forex brokerage

Opening a Forex trading platform is a very complex and expensive process; lots of preparation is required.

Further, the following steps will complete the process:

Market Research: Understand your competition and who is your target audience, their age, gender, interests, income levels, geographical location. All these things will help determine in which area to register the legal entity, the promotion strategy of the platform, the languages supported, etc.

Seed Money Organization: Opening a brokerage is an extremely well-planned process in which the operational cost should be accounted for at least several months. It includes an approximation of operational and trading capital in order for them to be fully funded.

Brokerage Company Registration: In order to operate with customer funds, one needs to have a corporate bank account for a legal entity that has a brokerage license. But, PSP’s partnership is very essential; similarly, working with multiple PSPs is also a very high recommendation so that associated risks with monetary transactions can be reduced.

Identifying the Type of Trading Platform: There are mainly three types of models. These are Market Maker, STP (Straight Through Processing), and ECN (Electronic Communications Network).

While market research and the preliminary arrangement of capital are common steps for any business, some factors basically need more focus and consideration, such as opening a Forex trading platform.

Company Incorporation and Licensing

With several jurisdictions specially recognized as hubs for forex around the globe, firms can register and obtain a brokerage license in accordance with the local financial regulations.

A license issued by these territories enables you to:

• Provide brokerage, among other financial services.
• Optimise earnings with favourable or zero tax rates;
• Safeguard and oversee client assets;
• Negotiate favorable terms with banking partners.
• Operate globally.

The leading ones are the USA, the UK, Malaysia, and Belize, after which go Hong Kong, Singapore, and Japan. The reason is that all these countries have very well-developed state oversight and regulatory frameworks, which instill more confidence in trading platforms registered within their borders. Still, it is costly and can take as much as one year to get a Forex broker license issued in these countries.

Offshore Options: Offshore jurisdictions are available that can facilitate the process of registration with fewer costs. Suitable locations include:

1. British Virgin Islands
2. Saint Vincent and the Grenadines
3. Seychelles
4. Cayman Islands
5. Vanuatu
6. Panama City

This means, therefore, that the offshore registration of a Forex company will be an excellent option for a startup broker, which needs to test their business model in smaller markets and apply then for a Class A Forex license.

Selection of a Trading Platform

Market Makers and Trading Bots

The primary characteristic of a market maker is that they create dealing centers that supply “artificial” Quotes for some currency pairs. The users, in this respect, trade against the broker, which means that in case of a win, the trader gains the difference, whereas in the event of failure, this loss remains with the broker.

Market makers perform three roles, mainly:

• Buy and sell prices of particular currency pairs are available.
• Undertake to conduct deals with any client using prices appearing on their dealing station.
• Assume financial risks for each trading position.

Their profits come from the spread: the difference between buying and selling prices. Because they profit directly from the losses of traders, market makers often come under suspicion on grounds of possible price manipulation.

STP Broker

STP stands for Straight Through Processing. It’s a system wherein customer orders should be channeled directly to the liquidity providers—whether banks or liquidity pools—to avoid potential conflicts of interest. In theory, several providers receive the order to ensure best price execution. The STP platforms charge for spreads and commissions whereby spreads vary depending on market liquidity.

ECN Broker

The Electronic Communications Network model forwards orders of traders directly to the Forex market without intermediaries. In this model, minimal delays are guaranteed, and traders can respond quickly to changes in the market. However, it cannot guarantee the execution of orders at a particular price because the interbank market does not provide the guaranteed orders like in the dealing centers.

White Label Solutions: You also have the opportunity to introduce a platform using ready-made software under your brand. It can save lots, but this will not be unique. Price for such solutions starts at $5,000 and plus $1,000-$1,500 per month.

On the other side, the renting of the trading platform can cost from 1,000 to 20,000 dollars per month, what is very affordable in the early beginning of any business but finally will become too expensive.

Key Ingredients of a Forex Broker and Platform

In developing Forex, there is a need to build both must-have and nice-to-have features. Main components are listed below:

Forex Client Area: This would include all that is needed for the trader to manage his assets, starting from back-office systems up to mobile applications.

Normally, it includes:

• Trader’s dashboard
• Back-office management tools.
• Partnership systems.
• Payment solutions.

Web design: It is necessary to have easy navigation. The design should take into consideration the issue of differentiation from the competition, focusing on the following: brand identity and design elements, integration of trading terminals with CRM, such as MT4, user-friendly interface scripts, and interactive guidance tools.

Online marketing: A good marketing strategy is as important as the technical side of the website.

Advanced Features

Leading trading platforms offer way more than currency trading. Successful platforms would normally include:

• The difference between trading contracts and trading options
• CFD-based trading, the margin trading capabilities.

News feeds, training courses, and webinars are other kinds of quality content that can further enhance the user’s experience and increase the credibility of the platform. Then, of course, there is the demo account feature—very helpful for traders with the aim of familiarizing themselves with the platform without exposing real funds to it.

Safety and Reputation

For traders, safety and reputation are primarily a function of the platform’s regulatory status and its state of presence online.

Key regulatory bodies include:

1. BaFin – German Federal Financial Supervisory Authority.
2. FCA and PRA – Financial Conduct Authority and Prudential Regulation Authority, UK.
3. NFA and CFTC – National Futures Association and Commodity Futures Trading Commission, USA.
4. CySec – Cyprus Securities and Exchange Commission.

A license from either of these agencies builds traders’ and partners’ trust; the more users, the more business opportunities. Being listed on leading Forex platforms is an issue of credibility.

Monetizing the Platform and How to Earn

Most platforms generate revenue through spreads and commissions. The spread represents the difference between the purchase price and the sale price, measured in pips. A pip is a minimum movement of the asset price, which, in simple terms, can be described as the price percentage point, or simply a percentage point. For example, if the exchange rate of the EUR/USD currency pair falls from 1.14009 to 1.4008, then it has moved a point. In case the price of a currency is given only three decimal places, then the third decimal place represents the same price point. The spreads may be fixed or floating. Variable spreads mean that their value normally depends on the market liquidity: the higher the liquidity, the smaller the spread. Commissions are trade expenses predetermined and dependent on the volume of trade, where the more the volume, the smaller the commission.

Apart from the spread and commission, a lot of trading platforms charge a number of more diverse additional fees: for trading software, current quotes of assets, indicators, and other functions. Other firms go so far as to collect a fee for calls to the support service or for the use of a security account and even sometimes monthly fixed ones.

History of Forex Trading

Forexx is the popular short form of FOReign EXchange. Normally, the term is used to denote the reciprocal exchange of freely convertible currencies, not all exchange operations involving currencies. The activities in the Forex market may range from trading and speculation to hedging and regulation, and include even the currency interventions of central banks.

It is as if history has taken Forex back to August 15, 1971, when US President Richard Nixon declared the erosion of the free convertibility of the dollar into gold.

This wrecked the system of stable exchange rates and was the culmination of the crisis of the post-war Bretton-Woods monetary system. It was replaced by the Jamaica Monetary System, the principles of which were laid down on 16 March 1973 on the island of Jamaica with the participation of 20 of the most developed states of the non-communist bloc.

The nature of the reforms was to follow a more liberal approach to the gold prices of various currencies. This process had to result in unavoidable fluctuations in the internal exchange rate of the respective currencies. Only a few years later in 1975, French President Valéry Giscard d’Estaing, along with German Chancellor Helmut Schmidt invited the heads of other leading Western nations to invite them to be part of the small group in an informal conclave for personal discussion.

The first summit of the G8-then only six members-had taken place in Rambouillet. Further to that, this represented the USA, Germany, France, Italy, and Japan, though Great Britain, France, Italy, Japan, and the United Kingdom were also accounted for, and Canada joined this select group in 1976, to be followed by Russia in 1998. Among the primary issues under debate was that of structural reform of the international monetary system. The FOREX international currency market came into being on January 8, 1976, at a meeting of the ministers from the IMF member countries in Kingston, Jamaica. Here, a new agreement relating to the structure of the international monetary system was adopted. It took the form of amendments to the IMF charter. This system was substituted for the Bretton Woods Monetary System. From then on, free-floating rates became the only mechanism of exchanging currencies. Finally, the new monetary system renounced the rule of calculating money’s purchasing power based on the contents of its value in gold. The currencies of the states that signed the agreement lost their official gold content. The exchange between them began directly in the free market at free prices. It is precisely this principle that gave life to the concept of freely convertible currency. This placed importers, exporters, and the banks serving them in a position where they had to continuously participate in the foreign exchange market because any change in the exchange rate could increase or decrease an enterprise’s profits or costs.

They are able to influence the courses of national currencies and, accordingly, the economic situation in their countries by market means-not only administrative ones.

The exchange rates of the most liquid national currencies emerge as an outcome of a search for a point of balance between the current demand and offered supply. It is for this reason that fluctuations in supply and demand within the market lead to the shifts in the exchange rate and begin to push it in one direction or another.

It is estimated that, for the period between 2005 and 2006, daily turnover on the FOREX market ranged approximately between $2 trillion and $4 trillion.

Quotation with any degree of definitiveness is impossible, since this is a type of over-the-counter market exempt from the requirements of compulsory registration and publication of data of transactions. Part of this volume is accounted for by margin trading, enabling contracts to be issued for values considerably in excess of the capital actually possessed by a given transaction participant.

With such huge daily turnover, whatever may be the nature and objectives of the transactions, high liquidity is ensured in this market.

Forex is an international interbank market. Correspondingly, the deals are realized by means of a network of central banks, commercial and investment banks, brokers and dealers, pension funds, insurance companies, transnational corporations, and so on.

The standard lot size of a single contract for the delivery of real currency on the second business day-what is normally referred to as the spot market-is normally USD 5 million or equivalent. One conversion payment costs between US$ 60 and US$ 300. Besides that, you also have to add as much as US$ 6,000 more every month for an interbank information and trading terminal.

Under these conditions, therefore, it is not possible to convert small amounts of money through Forex. It will be cheaper instead to resort to financial intermediaries which would handle the conversion in exchange for a certain percentage of the transaction value. In turn, since the intermediaries serve a huge number of clients and receive all kinds of orders, they often do not have to perform real conversions via Forex. In return, they get their commissions regularly from the clients. Because not every client request reaches Forex, an intermediate broker can pass on commissions to clients significantly below the cost of direct operations on Forex. But if those intermediaries were taken away, the price paid by the end client for the conversion would invariably rise. The current quote of the currencies applies to a lot of transactions which may not have direct access to the Forex market. This may include, for example, countries’ currency exchange rates when regulated by some state-owned bank trying to hold the proportionality in the currencies’ rate of exchange. This would be despite the usual case, when real supply and demand on the territory of this country are not in tune with the actual Forex market trends. That is to say, for instance, if there is an oversupply of euros in the domestic market and at the same time the price of the euro against the dollar is growing on Forex, the central bank will be obliged to raise the price instead of lowering it in view of excessive supply.

One more striking example is margin speculative currency trading, which aims at the establishment of current quotes in Forex but is conducted under conditions that imply no actual delivery. Almost every intermediary of the currency market offers to their clients not only direct conversion services but also a chance for speculative trading with leverage. On many transactions, commissions are even lower than for a direct change because the volume traded and the short-term nature of the deals mean that the need for any formal delivery contract occurs even less frequently. More often, commissions take the form of a spread-a set difference between the buying price of a currency and its selling price at that very moment. Usually, there is a chain of several intermediaries between Forex and the speculator, each having his cut. The margin operations could generate additional demand or supply of currency especially over the short run though they may not necessarily generate it. They cannot determine the general direction of the fluctuation of the exchange rates.

In Runet, the word Forex is usually understood as not the system of currency exchange in general but a particular sphere of marginal speculative trades performed via commercial banks or dealing centers. Rather often, the dealing centers registered in Russia or Ukraine cannot be legally entitled to provide financial services because of the intricacies of currency and tax laws. Because of this fact, they operate under cover of a betting license. In most of the cases, even in training courses, no differentiation is made between these two concepts of currency exchange and margin trading. Whenever Forex is referred to, it almost always implies margin trading. No wonder, because it is not out of the ordinary to come across some appealing slogan like “earn money in Forex.” Indeed, the above appeal plays on the duality implicit in the word “Earn”: to wit, on one hand, to work with some kind of remuneration, while on the other hand, it is a way of generating some form of income, an income named Profit. Of course, it has to be put in mind that the margin trading proposed is not getting a salary from an employment but rather a form of business that demands its own capital and is open to risks. Any textbook of economics would say that any business promising high return is certainly fraught with more risks. The use of leverage gives rise not only to greater profitability of operations and accelerates capital growth but also leads to a growth in the risk of losses.

Margin trading is one kind of activity with its characteristic features: it does not require any big initial capital, there are no bosses and subordinates, practically no competition for suppliers and consumers; it is the operation that does not require the compulsory acquisition of new techniques and skills and promises extraordinarily high possible profitability although the risks of loss are also very considerable. These features make margin trading extremely attractive for those who begin exchange trading with small starting capitals. It is quite easy to see everything with your own eyes and try it on training accounts with virtual money. However, you should be very careful and critical about the “results” you get. Such accounts usually “live” 2-4 weeks. During this period, it is by no means the case that one can see all the possible situations on the market. Most beginners see only what they want to see: the ease and speed of increasing funds. Meanwhile, let no one forget that any business in and of itself has an element of risk associated with gain, in view of mere happenstance. For it to come in regularly and respectably for maximum profits, though, one needs to know not just the specifics of the kind of business at hand but also the overall economics involved. It is only by respect for these laws and restrictions that currency trading becomes comparable in risk level to any other form of speculative trading, including the stock or commodity markets. However, by this very fact, it will inevitably become less profitable just like the rest.
Building a Forex trading platform, one should never forget that this is a very competitive market. The best way to start business activities in such an environment is to first commence small-scale business ventures and grow over time progressively. Yes, you may start business at a certain location, get a monopolistic advantage in that area, and when settled you may expand your business into the international market. In this starting phase, do not focus too much on monetization- your commission, ideally should be low in the first year of going live. But you will win the market not just because of offering lower prices, but because you are different from others.

How to open my forex broker

Starting your own forex broker is one of the good ideas for entrepreneurs willing to join this fast-growing currency market. Still, one should know that this process requires very serious market knowledge, regulatory requirements understanding, and quite a big initial investment. In the framework of this article, we will try to give some step-by-step guidance that will help understand what the main aspects are when opening a forex broker.

Conclusion: Opening your own Forex broker requires lots of work and investments, but with the proper approach and strategic planning, this kind of business gets highly promising and profitable. High standards of quality and transparency of the services will be at hand to win the clients’ trust and compete long-term.

Creating own brokerage firm

In the last few years, interest in financial markets has visibly grown, hand in hand with the development of qualified brokerage services. Opening your own brokerage company may be profitable and promising, but one should approach it with great care because this process needs to be handled with great compliance with a number of legal and regulative rules.

Conclusion: Opening of the broker is connected with a considerable initial investment and long preparations. Still correctly treated and under the condition of observance of all requirements of the law it can become the basis for effective and profitable business in a future.

Forex broker franchise in cfd platform

A forex broker franchise is thus a very particular chance to enter the world’s financial market as an entrepreneur with a pre-set brand and working trading platform. CFDs are a particular kind of financial tool in demand because they grant the possibility of trading speculation on fluctuations in the price of an asset without actual buying. Within this article, let’s examine main aspects of opening and operating forex broker franchise on a CFD platform.

1. Selection of the franchisee offering

The first thing to do is to select a franchisor. The reputation of the company, stable trading platform, and available instruments are important. Besides, it’s worth paying attention to franchise conditions: the size of an initial investment and monthly payment, technical and marketing support.

2. Legalization and licensing

Operating a forex broker requires a license from a financial services regulator. Depending on the region, this may be the national securities commission, central bank or other financial regulator. It is quite a complex process that involves a lot of paperwork and also comprises specific requirements such as qualified staff and sufficient capitalization.

3. Technological integration

A trading platform is that forms the backbone of any forex broker’s operation. Usually, some form of ready access is given to a franchisee, which greatly simplifies the whole startup process. You need to be certain this platform supports all types of CFDs you want to provide and that it is secure and reliable.

4. Compliance and risk management

Control risks and observe the changing legislation. A forex broker is obliged to control risks and be compliant with changing legislation. The franchise should provide full compliance support, including regular staff training and updating internal procedures according to new requirements.

5. Marketing and Development of Client Base

A brokerage company’s success depends on attracting and retaining clients effectively. Although marketing materials are usually developed by the franchisor, who also designs promotion strategies, in most cases, localization in a particular market and active interaction with clients are left to the franchisee.

Conclusion: a CFD forex broker franchise can become a rewarding solution to enter the financial market with minimum risks. Similarly, success is going to depend on the choice of the franchisor, observation of all legal and regulatory requirements, active work with the client database, and management of the risks.

Start my own forex broker

Setting up one’s own forex broker is an ambitious undertaking that logically would presuppose deep knowledge of the financial market and strict adherence to regulatory requirements, as well as attracting clients in a very competitive environment. This article is aimed at giving some overview of specific critical steps in setting up a forex brokerage company.

Conclusion: Setting up your own forex broker requires an outstanding effort, significant initial investment, and strict compliance with a lot of requirements coming from various regulators. Still, with the right approach and dependable infrastructure, it has every chance to become a profitable long-running business in the world of financial services.

Setting up our own forex broker

Opening a forex broker is presupposed by great knowledge of the market, strict adherence to regulation, and an effective strategy for attracting clients. Setting up a business practically means creating a unique provider of services related to the trading of currencies on the international foreign exchange market-one of the main reasons entrepreneurs want to be able to act globally. The following article introduces key stages in setting up a Forex brokerage company.

1. Market research and choice of business model

The very beginning for a forex broker is to deeply investigate a market and to outline a niche in which it will work. You need to understand who the customers will be, what kind of products you will sell-just currencies or also CFDs, metals, cryptocurrencies, etc., and what competitive advantages you can offer: low spreads, high quality support, unique technologies, etc.

2. Company registration and jurisdiction

The jurisdiction choice is of importance because it predetermines the requirements for compliance with law regulations, a tax burden, and altogether, the reputation of the business. Among the most popular jurisdictions of forex brokers are the United Kingdom (FCA), Cyprus (CySEC), and Australia (ASIC). Company registration in the above-listed countries enables one to win the trust of clients and partners alike.

3. License obtention

One of the most complicated and longest processes is getting a regulatory license. It opens opportunities for conducting real brokerage activity, and almost always it requires a serious initial investment, too. The procedure involves a filing of papers and capitalization confirmation, after which the company audit and sometimes the contributions to compensation funds or deposit insurance are made.

4. Choosing and setting up a trading platform

First of all, you need to select a trading platform. For today, the biggest demand among traders is for MetaTrader 4 and MetaTrader 5 due to their functionality and reliability. It is necessary that the platform be integrated technically with your internal infrastructure, including systems of risk management, CRM, and automated trade execution.

5. Risk management and compliance

The protection of the interest of the client should be ensured according to the regulatory requirements by incorporating various risk management strategies along with internal controls. This would include customer transaction monitoring, AML policy compliance checks, and management of operational risk.

6. Marketing strategy and acquisition of customers

The final stage will include the elaboration and implementation of the marketing strategy: brand popularization, attraction of new customers online and offline, educational programs, seminars, active usage of social networks, and partnership programs.

Conclusion: Setting up such an environment for one’s own forex broker requires a huge effort and investment, but in case of the right approach, it may bring the highest profitability and sustainable business development. The main stages follow one after another: market research, registration and licensing, technological preparation, compliance, risk management, and marketing.

How to open a forex broker company

Opening a forex brokerage company is a very exciting yet involved undertaking, involving a lot of complicated work in planning, following regulations, and strategically managing and marketing the enterprise. The article will outline in basic strokes the key steps for establishing a forex brokerage company.

Determinant of Business Model

The first step will be the choice of a business model. It is necessary to decide whether to provide ECN brokerage, to become a market maker, or to choose the hybrid model. Each option has its own peculiarities, risks, and capitalization requirements.

Conclusion

Opening one’s own forex brokerage company requires serious initial investments, deep knowledge of the market, and the ability to manage risks. However, if all steps are successfully completed, the above-mentioned endeavour can turn into a profitable and stable business of financial service provision in the international arena.

Before opening your personal online Forex broker, lawyers from  Regulated United Europe recommend to carefully familiarize yourself with the current legislation of the country in which your project will be launched, get forex license and only after that start to accept deposits from traders.

Also, lawyers from Regulated United Europe provide legal services for obtaining a crypto license in Europe.