Have you considered running your own brokerage? You should. Forex trading industry is a huge business. More than $5 trillion is traded each day in the Forex market. Thanks to its massive profit potential, this industry continues to draw an ever-growing number of investors. Profits and losses can be practically unlimited with proper risk management in place, so it obvious why so many brokerages are being opened to claim their share of the market.
Starting your Forex brokerage can be an exciting business opportunity. As with any other business, it makes sense to do some homework on how to become a Forex broker and then construct a Forex brokerage business plan. You need to be aware of key aspects, such as where you will be registering your brokerage and what trading instruments you will be offering.
The biggest decision you can make in the beginning is whether you want to open a brokerage from scratch or opt for a white label solution. To help you make your decision, we have complied a comprehensive, step by step, guide on how to start a forex brokerage firm.
How to open your own Forex company from the ground up
Apart from investing a lot of time and effort, opening a forex brokerage from scratch requires a solid start up capital. Complying with all the legal requirements, negotiating with banks, building attractive website will take up a lot of time. On the other hand, there is a big benefit to doing thing this way. The entrepreneur keeps 100% of profit and has full control over your business. To make thing easier to understand, we have highlighted 8 important steps to follow in order to open a forex company.
- Do your research!
First of all, you need to define your target regions. You should select a jurisdiction to register your brokerage based on the knowledge where your customers will be coming from. This is a huge decision, as licensing requirement can vary greatly from one country to another. Often it is easier to start own forex brokerage in a place different from your origin. For example, many companies that serve traders from around the world are based in Cyprus for tax and legal purposes. This is why it is essential to Compare legal requirements of several jurisdictions before making a decision.
- Formulate your business plan
Yes, creating a thorough business plan may sound daunting. Even if you feel it would be a waste of time, there is plenty of benefits to it. Creating a new financial company is a long journey and having a Forex brokerage business plan will definitely help to streamline this process. Your plan needs to consist of target markets descriptions, start up capital, marketing and social strategy, projected profits and expenses, competitor research, etc.
- Gather start-up capital
Usually, capital requirements are set by the jurisdiction. You need to contact the financial regulator in your jurisdiction to learn what the minimum initial capital size is. In addition to this, it can be very costly to set up a forex brokerage. Always keep in mind that you will need sufficient funds to cover operating expenses during the first 6 months to 1-year period at least.
- Choose your partners
Every brokerage needs a reliable payment services provider. There is no way around this. The only way to compete in the market is to have a stable payment processing system. It can be a good idea to negotiate with more than one system. This way, you will have an alternative option in case the primary payment processor’s software fails. You should always be able to provide different deposit and withdrawal options to your clients.
When it comes to leverage, you must negotiate a line of credit with a bank. As this process is often arduous due to bank’s complicated verification and approval procedures, plan ahead and allow enough time for this process.
- Making yourself visible online
At this stage, you will want to create a website and decide what trading platform you want to use. You can go for the standard MT4 or have additional services, such as Android/IOS app, or even your own branded webtrader. Building a high-quality website can eat up a lot of time, so plan ahead and tackle this step early on.
- Choose and equip your office
Your brokerage will need to host several different departments. At minimum – IT-personnel, financial personnel, customer support team, marketing and sales teams, compliance officer. In the beginning stages, when there is low trading volume, some of the roles can be executed more efficiently. If an employee has proper qualifications, he can easily combine several roles. This will of course change as your business scales up. In today’s startup culture, virtual offices are becoming more and more common. However, you will most likely need to set up a physical office location.
Testing is key to success. You will only have one shot at making a successful launch. So, be sure to allow enough time to test everything before your brokerage goes live. Professional testers should take their time and test everything several times including – the platform, payment processing systems, the terminal, the app etc. This time can also be used efficiently to train your personnel, especially the customer service department.
- Going live
This is the most exciting part. This is where months of hard work will start to pay off. Don’t forget that your involvement doesn’t stop here. It is crucial to support your launch with a well-developed marketing campaign.
Using a White Label solution to become a Forex broker
For those who feel that starting your own brokerage from scratch is too complicated, there is a more elegant solution. Many large brokers offer Forex White Label solutions. This means that you will be in charge of running the “store front”, while all technical trading operations are handled by the large brokerage. Forex While Label business has drastically lower set up and operating expenses. In addition, it doesn’t have to comply with capital requirements. For majority of people starting their own business, this solution is much more acceptable than setting up a forex brokerage from scratch. In the following step-by-step guide, you can see in more detail how this approach differs from the previous one.
- Choose your partner
Even though there are many brokers that offer Forex White Label solutions, it is vital to choose a reliable partner to avoid customer disappointment. During research, pay close attention to thing like safety of funds, quality of execution and flexibility.
- Research legal requirements
In most parts of the Western world, you are required to register and get licensed as a broker. However, there are many jurisdictions where incorporating a company is enough. For example, you can register your company in one country, but set up your offices in another country entirely.
- Formulate a business plan
This part is mostly the same as if you were starting a company from the ground up. Building a proper Forex brokerage business plan will help you keep focused and on track.
- Grow your brand
To make your brokerage look like a trustworthy business, you need to have a high-quality logo, branded materials and professional content. Forex While Label business can function completely online as it doesn’t need nearly as many personnel. You need to decide whether investing in a physical office will be beneficial for your brand in a long-run.
- Offer additional services
As a new kid on the playground, you will need to offer some competitive advantages. Your customers should have an easy time working on your platform. You can offer them incentives like educational material, or trading copy software. Make your platform as user-friendly, and content-rich as possible.
Even though you will receive a ready-made trading platform, you should still devote some time to testing to check if everything works correctly.
- Going live
One everything is set up, you can start running your While Label business.
For those looking to start their own brokerage, Forex White Label can be a good starting idea. This option will drastically cut down on the legal and capital requirements as well as the set-up time. Significantly lower operational expenses will especially come in hand during the first few months while you are still expanding your customer base. As your business expands, and your trading volume starts to grow you can start thinking of becoming a Forex broker with full control over operation and profit. When you have already built up a name for yourself in this industry, it is much easier to secure additional financing.