Forex trading is big business. The daily turnover on the Forex market is about $5.3 trillion, and it continues to attract more and more investors. With effective risk management, the profit is practically unlimited, therefore it is not surprising that new and new brokerage companies enter the market that want to take their market share.
Almost every month we hear about new brokerage company opening in different countries. The competition on the Forex market is enormous, therefore it is essential to have a company that can provide all of the services with a wide variety of choices. In this article we will offer a step-by-step guide of establishing a brokerage company.
Creating a Forex company is an amazing business opportunity, but, like in any other business, it makes sense to first find out (learn the whole background) how to become a Forex broker, and then draw up a business plan that will include such important aspects as: registration of a brokerage company and selection of a list of tools that you will offer to traders.
You also need to think about whether you want to create a zero brokerage company or want to choose a White Label solution.
How to establish a Forex brokerage?
Creating a brokerage company from scratch requires start-up capital, as well as time and effort to create a Forex business infrastructure. We draw your attention to the 6 important steps that you need to go through:
- Identify target market
- Find an investment
- Choose liquidity providers
- Payment processing
- Ensure the work of a brokerage company
- Beta test and full launch of the broker
1. Identify the target market
Before starting it is important to determine the target region. Locating your customers will help you choose the best jurisdiction to register a Forex broker. This is important, as in the financial sector the requirements for obtaining a license in different countries differ from each other. There are many jurisdictions of interest to Forex companies, for example, CySec, FCA, British Virgin Islands, Cayman Islands. Before making a decision, it is necessary to compare and select the optimal jurisdiction.
2. Find an investment
The amount of capital that you need is usually set by the jurisdiction, but you should know that regardless of the requirements, the cost of creating a brokerage company is high enough, so it is advisable to make sure that you have enough funds to cover the costs. Ideally calculate the capital for the first year of your company’s work.
3. Select liquidity providers
The key to the success of the Forex broker is liquidity. It is imperative to connect with leading liquidity providers. Since you will need to offer your clients leverage, it is recommended that you connect to a reliable Forex liquidity provider with direct market access (DMA) and to Tier-1 liquidity providers.
4. Payment processing
You have to cooperate with payment service providers so that you can compete in the market, as well as have various options for replenishment and withdrawal of funds for the maximum comfort of your customers. If you intend to offer cryptocurrency trading, consider integrating cryptocurrency processing, to send and receive payments online in cryptocurrency.
5. Ensure the work of a brokerage company
At this stage, you have to create a brokerage company website, choose which trading platform you will use, what additional services you want to integrate. You will also need to open an office with IT personnel, a financial department, a customer support service, a sales and marketing department, with whom you will interact with in the future.
6. Beta test and full launch of the broker
You need to allocate enough time for testing the trading platform, payment processing, mobile applications and other technical aspects by the focus group of your potential customers before your broker starts functioning. This will allow you to continue to work and deal with possible problems before starting work for real (with a large number of clients). After you analyze the test and work on the errors, you can begin to build your own Forex business.
White Label Forex Broker Solution
Due to the long registration processes and the difficulties of starting, many companies prefer to provide brokerage services using the White Label solution. In essence, this is brokerage software that has already been thoroughly tested and proven to work. The big advantage of using White Label is that you eliminate the need to solve technical issues, including system implementation and customer support.
The White Label solution as a whole reduces operating costs, since you will not need to comply with the regulatory requirements for capital, and you will not process trading operations. In addition, you pay significantly less for the license of the trading platform compared to its own installation.
Having a desire, you can easily open your brokerage office and earn money on how your customers trade on the exchange. But you should also keep in mind that you should follow every step carefully. Each of them are interconnected thoroughly, thus by missing one you are missing the rest. You should always consider that with the abundance of dishonest and illegal brokers in the world of Forex your brokerage company may experience little suspicion at the beginning so always try to work on your company and promote it as much as possible. Otherwise you will end up in losses. A good marketing strategy as well as a proper campaign is a path to a successful brokerage company.