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How to Start a Forex Brokerage Firm From Scratch? - Beginners Guide

Author: Rosemary Barnes
22.11.2021

The Forex industry continues to become a magnet for business owners who want to capitalize on the exploding interest in trading. Theoretically, the task sounds pretty simple - run a company, attract your first clients, and start gaining profits in that market. When it comes to the practical part, business owners face a set of pitfalls and headaches.

With the augmenting number of Forex-related scams, traders are more demanding. Up-to-date beginners enter the market with a clear understanding of its basics and some personal goals. On top of clients, FX business owners need to keep in mind numerous aspects, including legal issues, technologies, external connections, and more.

Ready to start Forex brokerage firm? Dive into the step-by-step guide first to avoid some common mistakes.

Forex brokerage theory: start with the market analysis

How to run a Forex business? Qualified experts will focus your attention on theoretical issues foremost - understand the industry you are going to conquer; otherwise, some mechanisms are about to surprise you.

Look through the core definitions, trading strategies, instruments and tools, business models, etc. The next step lies in the analysis of your target audience. Imagine a portrait of your potential client: age, location, experience, goals. Glance over the statistics - how an average trader looks like. Such a process is exceptionally important for your future marketing strategy.

Are you done with the Forex theory? Then dive into the stages of how to start brokerage firm. The process includes the following steps:

  • Think over the brokerage model.

  • Make your brokerage company compliant with legal requirements.

  • Customize your business.

  • Integrate top-rated components.

  • Provide clients with high-level technical support.

Steps sound clear, logical, and straightforward; meanwhile, every stage becomes a true challenge for beginner business owners due to a set of pitfalls they may face.

I. Think over the brokerage model

When you are going to enter the Forex market, understand which role matches your goals and demands the most. First and foremost, brokerage businesses are roughly broken down into two categories:

  • A-Book model;

  • B-Book model.

What is the difference between the given brokerage business models? The A-Book model is more common for beginner firms, as it turns out to bring profits even with a low client base. Such a model means that brokers cannot function without the help of market makers. Liquidity providers connect companies to liquidity pools, while bid and ask requests are fulfilled by market makers directly.

Brokerage businesses working according to the A-Book model are divided into STP and ECN types. An STP broker gets the right to choose liquidity providers from a pool, while ECN (Electronic Communication Network) serves as a liquidity hub itself, limiting your opportunities. While looking for liquidity providers, Prime-of-Prime ones unlock access to the deepest pools no matter what instruments you need.

As for the B-Book Model, such companies are also called dealing-desk brokers. No providers of liquidity are connected, as a firm uses its inner liquidity, matching the bid and ask requests of signed-up clients. The model might be the case when a company hosts millions of clients, and monthly trading volumes are counted in billions of USDs.

No one can ignore the skyrocketing interest in digital assets. The capitalization of the crypto market is hitting one record after another, and crowds of traders are interested in earnings from the market volatility.

This said brokerage businesses are also divided into three types:

  • Forex brokerage. Traders access fiat trading pairs only.

  • Crypto brokerage. Traders may buy and sell digital currencies.

  • Mixed model. A firm provides clients with access to both fiat and crypto-assets.

How to start cryptocurrency business? The process is pretty much the same, but business owners need to focus more on legal issues.

Why should you understand the preferred business model foremost? A business model is your determinant factor while hiring required experts in your team. For instance, a crypto broker needs lawyers specialized in crypto legislative norms.

II. Correspond with legislative aspects: where to register a company

Forex-related businesses are strictly forbidden in 20 countries; this is why more than 100 jurisdictions are available for business owners. On the other hand, all the beginners are interested in "calm waters" - Forex-friendly jurisdictions with ultra-competitive legislative requirements. Where to start Forex brokerage firm?

All the Forex-friendly jurisdictions are divided into five categories - from A to E, where A countries have the strictest requirements and E countries offer the easiest conditions to run a brokerage company:

  • A countries (Switzerland, United States);

  • B countries (Australia, United Kingdom);

  • C countries (Cyprus, Estonia);

  • D countries (Belize, Vanuatu);

  • E countries (Seychelles, Saint-Vincent and the Grenadines).

The experts recommend business owners choose the golden middle - C jurisdictions where conditions are favorable enough.

What is the procedure of running an FX brokerage business?

1. Register a company.

Send an application to the local regulator. Pay all the charges, and establish an office (most jurisdictions include an office in the list of requirements).

2. Open a corporate account.

All the countries demand a brokerage firm keep a certain amount of money as registered capital. Open an account in one of the local banks and deposit funds there.

3. Send an application for a license.

Licensed FX brokers only are allowed to provide traders with financial services. Get all the required papers to submit your application. Note the special requirements. For instance, some countries require managing staff members to have experience of at least one year. Application processing usually takes from 3 to 18 months.

4. Send reports to a financial regulator.

When a company has entered the market with a license, never forget about legislative requirements. Companies are forced to send monthly, quarterly, or annual reports to a financial regulator.

III. Branding and corporate style - reputation is of much account

The Forex market is a fiercely competitive industry; this is why branding and customization are two basics of your reputation. How to start brokerage firm based on a unique style?

Traders need to understand that your company cares about its reputation. Create a fully-functional, convenient website, integrating your corporate color scheme and interface ideas. A website should correspond with the following criteria: ultimate functionality, up-to-date design, and straightforward interface.

IV. Connect top-rated components and integrations

When the legislative requirements are behind, and your path to the Forex industry is free, keep in mind that traders expect to get ultimate functionality. What are the core components of a brokerage business?

1. Trading platform, a mechanic core of your business.

All the trades and requests are processed through trading platforms, and such a component may include diverse sets of tools and instruments: charts, analytical instruments, robots, information, and more.

The market overview shows that MetaTrader 4 and 5 are the two most widespread trading platforms appreciated by traders. Perhaps, those solutions do not carry the broadest functionality, but most of the tutorials and educational materials are based on MT4/5. This is why traders are looking for such platforms as well. Is it possible to start Forex brokerage firm, integrating MetaTrader products?

Licensed solutions cost more than $100 000, and such expenses are too severe for beginner business owners. The White Label model cuts expenses by 10 times, providing access to the top-rated platforms.

2. CRM system, all-in-one control.

CRMs tailored for the needs of the Forex market are frequently underrated. Newcomer brokers are mistakenly convinced that such a system has little influence on their businesses.

Eye-catching CRM software is your observation center where business owners access all the processes and requests in one-two clicks. On top of the control, a Forex CRM solution carries a set of useful features onboard. Top-rated systems enable business owners to connect external integrations like security settings, KYC verification instruments, payment providers, etc. What's even more important - a business owner gets all the integrations connected and set up by qualified specialists.

CRM systems are must-have options from the viewpoint of cost optimization. These solutions automate all the processes, making it possible not to waste money.

3. Investment platforms, expand your audience.

While speaking of beginner brokerage businesses, investment platforms are not a must; meanwhile, ambitious owners always want to have enough space to grow.

Such a platform is connected with the help of the manager's API and doesn't impact the work of trading platforms. The solution unlocks access to copy trading, MAM, and PAMM accounts, expanding the opportunities your clients have. The copy trading strategy is going to become more and more demanded.

Furthermore, top-rated investment platforms support crypto trading - master and investment accounts can be opened in both fiat and digital assets. This said you may start Forex brokerage firm with an investment platform from the very beginning.

V. The importance of technical support

You've registered a company, got a license, chosen a reliable liquidity provider, and connected advanced technical components. That sounds perfect for traders; meanwhile, business owners should never forget that beginners suffer from the lack of experience.

Technical support is exceptionally important for brokerage businesses. Set up multilingual 24/7 support to solve your traders' problems. Meanwhile, you need to keep up with the time - 70% of questions are usually answered via chatbots. Implement advanced technologies to save your money.

White Label solution - key pros of a turnkey brokerage service

When the herein given steps sound too complicated, reliable providers of technologies unlock an alternative - get a White Label Forex business, avoiding all the pitfalls and difficulties. Such a service means that qualified professionals register a company, get a license, connect all the required components, and a business owner obtains a business solution ready to enter the market and bring profits.

What are the main pros of turnkey brokerage?

  • Business owners avoid typical mistakes and obstacles.

  • The BaaS (brokerage as a service) solution cuts expenses.

  • Technology providers connect advanced and innovative solutions that boost your business.

  • Security issues are among the top priorities for providers; this is why you get eye-catching security and KYC instruments integrated.

  • Business owners get a customized solution that corresponds with your corporate style.

As for the overall list of advantages, the pros are more expanded. This is why about 60% of newcomer brokers understand WL as the best way to start forex brokerage firm.

Bottom line: what is the best way to run a brokerage business from scratch?

To sum up, a run of brokerage businesses is rather a complicated process. Beginner business owners face a dilemma which models to choose, and professional advice is especially useful at this stage.

B2Broker is a magic instrument that turns complicated issues into clear ones. The world-known provider of liquidity and technologies offer business owners a turnkey brokerage service. Get a Forex, crypto, or mixed broker ready to enter the market. The package includes WL trading platforms (MT4 or MT5), a connection to Prime-of-Prime liquidity, and the CRM system of the new generation, B2Core. Other components are available optionally.

B2Broker is all about fueling businesses to provide owners with industry-changing solutions. Why should you invent the wheel? Delegate the process to experts who combine many years of experience with recent innovations.

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