Your Must-Read Guide on How to Start Forex Brokerage Firm
Trillions of dollars swirl in the Forex market every day and this massive profit potential vortex is gripping more and more investors and startups into the industry. So it‘s a small wonder why many business enthusiasts start forex brokerage today. However, before turning a great business opportunity into a profitable brokerage firm it’s essential to do thorough research. You need to be fully prepared and know everything: from the best location of your business entity registration to foreseeing the first-year operation costs.
We will try to enter the topic smoothly and highlight the most important steps that should be taken before opening a firm.
Basically, you have 2 options to start forex brokerage business:
- to build it from the ground up
- to run it with White Label Solution
We are going to check the steps each option of starting brokerage a firm includes, challenges and approximate costs. Let’s go!
How to Start your Own Forex Brokerage from Zero
The major benefit of running a brokerage from scratch is that you – the owner – keep all the profit and have full control over the business. And still, it requires a lot of time, patience and, of course, money (well, every business setting up process demands pretty same ingredients).
So, what steps do you need to take in the first instance?
- Research on your target audience location
Having a well-defined target market is more important than ever. Once you have made an analysis of who are your potential customers and where they come from, it will be much easier to choose the best jurisdiction to register your brokerage firm. Licensing requirements for this type of business are a far cry from one country to another and sometimes it’s much easier to start brokerage business in a place that is not your origin country. Cyprus, for example, is a top location for Forex brokerages due to tax and legal terms.
So, before making a final decision about the local or offshore jurisdiction of your brokerage company, screen carefully through several jurisdictions and choose which suits your business needs best.
- Apply for a Forex broker license
Prepare for providing with a set of documents at every stage of opening brokerage as well as for passing qualifications. For example, if you plan to operate in the US, apply at the U.S. Security and Exchange Commission (SEC). In case you going to do business somewhere across the world, you’d need to obtain an information kit from local financial institutions.
- Ensure you have enough startup capital
Money is a bloodline of every organization and business. Without sufficient capital, no company is able to manage initial operating costs. That is why you need to check with your jurisdiction minimal initial capital amount and make sure you are financially strong enough to cover expenses for at least the first year of work.
- Cooperate with reliable payment partners
It is essential for a brokerage firm to choose the right payment service providers for your clients to make different deposits and withdrawals in the most convenient way. After defining your target market select payment methods that are the most popular and typical among the customers. In order to avoid the payment processor’s failure that can happen anytime, consider a fallback option choosing several payment systems to cooperate with.
- Find liquidity partners
It is vital to connect with leading liquidity providers to make transactions flow easier and pricing more competitive for your customers. Therefore, you need to find a trusted Forex liquidity provider giving instant access to all Tier-1 FX liquidity spots.
Also, your clients will need leverage for a successful Forex trading experience so it’s important to arrange a line of credit. Note, that this process might take time due to banks’ complicated verification & approval procedures.
- Find a trusted technological partner
To build a FX trading platform and broker ecosystem integration from scratch you got to hire a team of technological experts with strong programming and designing skills.
It’s essential to contact a company that has relevant experience building similar software for your target market, a proven track record of successful products, and client reviews.
You can drastically minimize the expenses and, possibly, improve the software quality by hiring out-staff teams from Eastern Europe (countries like Ukraine) while keeping the management in-house.
For backend development of your project, search for specialists familiar with main server technologies, and knowledge of Ruby, Python, Net, Java, or PHP.
For example, for mobile development, you’d need iOS and Android devs that must know Swift / Java (iOS) and Kotlin or C# (Android).
- Build a website
Your website is your trademark promoting you 24/7. It must be well structured and guide your customers to the main services or platforms you offer. So when looking for a web development company for your website, make sure you obtain a good quality of work performed by skilled web engineers. Getting a really good website will help you to stand out in the overcrowded market. Consider it rather an investment than expenses.
- Form an office
At the beginning of an operational way of your brokerage company, you will need to hire a few specialists per each of the following departments: IT, PR & marketing, compliance, and customer support. Therefore, it would be really awesome if you could place them all in one place to achieve great results together, that is, in the physical office. If you cannot afford it, you can replace this step with a virtual office, as this commonly accepted in a modern forex broker startup culture.
- Test before going live
Everything needs to be tested several times before you let your brokerage be used by customers. Spare no time on checking your software by professional testers or a focus group of your potential customers. This step will let you fix all the bugs in time, and avoid unnecessary surprises and unhappy customers.
Once all these stages are completed and your marketing campaign is effective enough, you are set to go live.
How to Start a Forex Brokerage with a White Label Solution
If all said above is a bit of a hassle for you, there’s another option to start your own Forex brokerage company. Many larger brokerages today provide forex white label software which means it’s already adequately tested and is ready to be put on the market. This way you save yourself time and are not responsible for technical requirements, implementation and trading operations processing.
As an Introducing Broker, you’ll only need to handle the marketing part for bringing new clients and customer support for keeping these clients.
The most significant advantage to reap: forex white label is many times cheaper than developing your own forex trading platform from scratch. You only need to cover set up fees, but in some cases, if you are skilled enough and have a great bunch of followers the offer may even come free for you.
So, with a white label solution, you can provide forex trading services under your company name.
You can also customize the platform interface and create a logo to be recognized by millions of traders. Additionally, to earn the higher income you’ll be able to set up your own fee structure and dealing spreads.
Now, let’s look at the steps on how to start a forex brokerage firm using white label solution.
- Prepare a business plan.
Your way to success is the result of proper planning as it clarifies how you would manage the business and generate profits. So as in the case with starting from scratch, creating a forex brokerage business plan is your task #1.
- Find a reliable partner.
It’s true that there are plenty of brokerage companies offering white label solutions. Your major purpose is to select the right partner to make your customers happy. Make sure the quality of execution is good enough as well as the safety funds.
By partnering with Fintatech you eliminate your business from the possible traps that can arise while developing your own brokerage from zero. Our turnkey professional solution for forex trading is ready to be implemented within 3-4 weeks.
Contact us for a consultation and a special offer!
- Investigate on the package of legal requirements.
Some countries like the USA, EU or Australia require their white label partners to get Forex broker licenses. Still, incorporating a company is suitable for many jurisdictions. In some instances, you may register a firm in one country and open an office in another.
The legal requirements kit will depend on a jurisdiction where you decide to register your company.
- Start your own brand.
To make your brokerage business look well-trusted, make sure you have a distinctive high-quality logo, specialized content, branded materials, etc. Although any forex white label business can efficiently operate online, consider opening an office where you will be able to welcome your customers.
- Extend services.
To attract more clients and be able to compete successfully on the market, think over offering additional services to your Forex White-labeled platform for a more enjoyable customer experience. You can your marketing for traders and investors by adding some interactive forex trading guides or enable Social trading in your software.
- Pre-launch test.
Even though you get a ready-to-go trading solution it’s essential to check everything up to work properly.
And woo-hoo! After everything is settled, you can put all efforts into generating leads for your supreme forex brokerage firm.
How Much Does it Cost to Start a Forex Brokerage
When it comes to counting costs on starting forex brokerage business, it scares off many beginners due to significant sums. The advice here is never to invest in a business you cannot understand. That’s why it’s important to know all the stages of business development as well as get the broker’s license and qualifications.
Fintatech is open to help you with consultations regarding White Label Solution operations.
Let’s check out the approximate expenses you are to face during forex company formation:
- Business registration – from $2,000, depending on the forex license costs. Many brokers initially opt for cheaper territories;
- Setting up a corporate bank account – $500-$3,000. Note, that you may need to make a minimum deposit during the whole process (from $50,000 to $500,000);
- Website development – $1,000 – $25,000. Consider contacting the company that builds websites tailored to Forex brokers’ business needs. At least, you can start from the “beta version” website, gradually optimizing its functionality;
- Purchasing Forex Trading Software – $5,000 – $150,000. The prices vary due to different payment models: some third-parties require a monthly fee, some require a one-time fee while the others are volume-based. Note, that White label solutions may require $0 fees);
- Opening an office (if planned to go beyond online presence) – $10,000 – $30,000. You don’t have to rent a large space with a crowd of people in it, just make sure it looks nice and professional;
- Hiring a team – depends on your local salary rates. Your team is your success fuel. At first, you’d need a powerful sales team to convert visitors to your clients, then support, financial and legal departments to manage these clients smoothly. And don’t forget about the marketing manager – the guardian of your brand;
- Advertising & marketing – from $20 to $200 per client registration. Being quite an expensive industry for promoting, it’s clear that without a strong marketing strategy it’s impossible to build a brand and grow your client base. So to take your brokerage to the next level, you should lead a quality marketing campaign.
There are two things that need to be highlighted after all: 1. Forex brokerage is a very profitable industry 2. Launching your own Forex brokerage can be extremely costly.
Сonspicuously, to establish a competitive brokerage business you have to complete multiple tasks as well as have enough budget. For example, to operate as a proper FCA regulated broker, you’d need some few million.
That’s why starting Forex Brokerage through White label solution may be a better idea in the early stages. For business beginners it means:
- loose legal requirements
- no start-up capital requirements
- essentially lower operating expenses
- faster setting up process
Once you have a solid customer base and a bigger volume of trading operations, start planning your own brokerage firm with full control and 100% profit.
Like we already mentioned it may be tough to deal with all these challenges by yourself and companies like Fintatech is here to help brokerage startups to skyrocket. If you would like to know how to set up a forex brokerage firm in just 3 weeks, give us a shout through the right upper “contact us” corner of our website.