How to start a Forex Brokerage Company
Wondering how to start a Forex brokerage? This is a very exciting business opportunity. But before opening a Forex company, there are a lot of important decisions from where to register a forex broker to how you will attract new customers (for example, by offering them high quality copy trading service). There are two major ways to start a forex trading business: open a company from scratch or use a white label solution.
How to open a forex company from scratch
Opening a forex brokerage from scratch requires solid start up capital and a lot more time and effort. You will need to incorporate this business and comply with all the legal requirements, negotiate with banks, build attractive website, etc. The benefit of choosing this road is that the entrepreneur keeps 100% of profit and has full control over your business. We have outlined 8 important steps to follow in order to open a forex company.
1. Research the target market
It is a good idea to define your target region (or target regions) first. Knowing where the customers will be coming from will help you select best jurisdiction to register a brokerage. In this business, licensing requirements vary greatly from one country to another, and it is often easier to start own forex brokerage in a place different from your origin. For example, a lot of companies that serve worldwide traders are based in Cyprus for tax and legal purposes. Compare legal requirements of several jurisdictions before making a decision.
2. Create forex brokerage business plan
Although a detailed business plan may seem not necessary, creating and promoting a new financial company is a long journey, and having a forex brokerage business plan helps streamline this process. A good business plan consists of description of target markets and buyer personas, start up capital, projected profits and expenses, marketing and social strategy, competitor research, etc.
3. Gather initial capital
Capital requirements are usually set by the jurisdiction, so check with the financial regulator in your jurisdiction what is the minimum initial capital size. But regardless of their requirements, cost of setting up a forex brokerage is quite high, as you will need to have enough money to cover operating expenses during at least first 6 months to 1 year period.
4. Choose right partners
First of all, a brokerage needs reliable payment services providers. There is no way to compete in this market without having stable payment processing system. Consider negotiating with more than one system, so you have a reserve option in case of the primary payment processor’s software failure. It is important to have different deposit and withdrawal options, which are convenient for your potential clients.
If you are planning to offer leverage (and who doesn’t?), you will also need to negotiate a line of credit with a bank. The banks tend to have complicated verification and approval procedures, so plan ahead and allow enough time for this process.
5. Set up your online presence
This includes creating a website, deciding on the trading platform or platforms (will you offer a standard MT4 or have additional services, such as an app or your own branded webtrader?), what additional services to integrate. Building high quality website is a slow process, so it makes sense to take care of this early.
6. Set up an office
As a minimum a brokerage needs IT-personnel, financial personnel, customer support team, marketing and sales teams, compliance officer. At the beginning when there is low trading volume some of this roles may be executed by managing partners and one employee may combine several roles, given that he or she has enough qualifications. Most likely you will need to set up a physical office location, although in the startup culture this step can be replaced with virtual office.
Allow enough time to test everything before your brokerage goes live. The platform, payment processing systems, the terminal, the app (if you have one) – everything needs to be tested several times, preferably by professional testers as well as by focus group of your potential customers. During this time you may also choose to train your personnel, especially the customer service department.
8. Going live
Once you are ready with the first seven stages, comes the exciting moment of going live. It is important to support launch with a well-developed marketing campaign.
How to become a forex broker using white label solution
There is an easier way to start own forex brokerage company. Many larger brokers today offer forex white label solution. This means that your company will only be responsible for a ‘store front’, while all the trading operations will be handled by the large brokerage. Forex white label business has lower operating expenses and doesn’t have to comply with capital requirements, as you will not be processing trading operations. This offer may even come free if you have enough skills, followers and qualifications. For majority of people starting a forex white label business via white label solution will not be free though. A broker typically requires white label partners to cover set up fees, but these fees are still much lower than the cost of setting up a forex brokerage from scratch.
1. Select a partner broker
Many brokers offer forex white label solutions, it is important to find a reliable partner to avoid customer disappointment. While doing your research pay attention to such things as safety of funds, quality of execution and flexibility (make sure the offer is flexible enough to match your business model).
2. Research legal requirements
United States, European Union, Australia require Forex white label partners to register and get licensed as a broker. However, there are many jurisdictions where simply incorporating a company is enough. In some cases it is possible to register a company in one region but set up the office in another location.
3. Create a business plan
Same as if you were starting a company from scratch, having a defined forex brokerage business plan will help you stay on track on the road to success.
4. Build your own brand
Prepare high quality logo, branded materials, professional content – making your brokerage look like a trustworthy business is your primary responsibility. Decide whether you want to have a physical office to meet and greet customers or not. Forex white label business doesn’t require nearly as many personnel as a forex brokerage and can exist purely online.
5. Connect additional services
As a new broker, you need to offer serious competitive advantages. Make it easy for your customers to work with your white labeled platform: for example add educational forex games, or white label copy trading software.
Although a broker will provide you with the ready-made trading platform, still set aside some time to check whether everything works correctly.
7. Going live
Congratulations! Once everything is set up, you can start generating leads for your forex business.
Conclusion – If you want to start a forex trading business
If you want to start a forex trading business, forex white label might be a better idea at the beginning. For a new brokerage it means lax legal requirements, the absence of capital requirements, faster set up process. Significantly lower operational expenses are the great advantage during first months while you don’t have solid customer base. It is possible to begin as an introducing broker (or a white label partner) and then, as the number of traders and trading volume grow, start thinking hot to become a forex broker with full control over operation and profit. When a brokerage already has established brand and customer base, it is much easier to secure additional financing.