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The global foreign exchange is the largest market in the world. It is truly gigantic — according to Bloomberg, the daily turnover exceeds 6 trillion US dollars. High trading volume and liquidity attract millions of traders. International brokers have a colossal target audience, and the profit potential is huge. You too can harness the power of Forex trading and set up a brokerage brand.
Until the 1990s, retail currency trading had not existed. Now, any individual can access the Forex market that was once the exclusive domain of banks, hedge funds, and other institutions. All they need is a trading platform and a registered account. Forex brokers act as middlemen between clients and foreign exchange.
Roadmap to Success
So, how to become a broker in Forex? Well-established brands were built on efficiency and knowledge of the Forex market. If you have traded in Forex yourself, it is a plus. Personal experience will allow you to understand the needs of the average Forex trader and the inner workings of this system. The broker trader relations will be easier to manage. Below, you will find four crucial steps in the development of a Forex brokerage business. Follow our tips to do it in the easiest and fastest fashion with a white-label provider, and cut your costs along the way. If you need to refresh your knowledge about Forex, check our comprehensive beginner guide first.
1. Pick Your Technology Provider
Finding a partner is the first step towards official brokerage. It is recommended you choose a provider with comprehensive support — a company that deals with all primary aspects of setting up a brokerage.
These one-stop-shop brands (white label) will help with formalities, technology, and technical support. Their turnkey solutions also facilitate the expansion of clientele. Consider all the potential costs as these will affect your business substantially.
2. Register the Brand
The next step is official registration as required by law. You may choose between three types of jurisdictions for Forex market operations. These include:
- unregulated,
- semi-regulated, and
- regulated.
Saint Vincent and the Grenadines or the Marshall Islands are unregulated spots on the map. There are no strict requirements for FX services, so registration is a breeze. This trick is used by an overwhelming majority of Forex brokers, as it is cheap and hassle-free. On the downside, you will not be allowed to work in the largest markets like Europe, and relations with banks may be complicated.
To become a Forex broker with access to the EU, register in a regulated jurisdiction: a member country like the United Kingdom or Cyprus. On average, the process takes half a year and costs over $100,000 (excluding hiring costs). Remember to add the cost of legal support for complex reporting.
The high price unlocks several benefits. First, you will gain access to the biggest markets. Secondly, your interactions with banks and other financial institutions will be smooth. Finally, a license from a regulated jurisdiction is beneficial for the corporate image — the Forex trader community is more likely to trust you. Obviously, only large companies can afford this form of registration.
3. Choose a Trading Platform
Can a new broker offer the most popular trading platforms? Yes! The most common options are MetaTrader 4, MetaTrader 5, and cTrader. More obscure choices include the likes of xStation or Utip.
A trading platform may be generic or proprietary. Of course, big Forex brands can invest in the development of their own solutions. However, if your brokerage business is only taking off, you may not have the capital for a unique trading platform.
When choosing a trading platform, businesses with limited budgets should consider white-label providers. You can operate under your brand but offer brokerage for the most popular terminals.
White label for MetaTrader 4 is one of the best models. Your clients will be able to integrate Forex trading robots into their terminals for automated trades. However, white-label branding options are limited, and the mobile app is relatively basic.
To choose a trading platform, consider your startup costs and ongoing costs as these may eat into your profits. The best choice is a white label solution with a fixed monthly fee. Find a company that will not charge you based on turnover.
Additional expenses include hosting and maintenance. Fortunately, you may delegate both tasks to your Forex white label provider. This will ensure around-the-clock monitoring and a minimal possibility of shutdowns. Technical interruptions are detrimental to a broker’s image, so make sure your server is always running properly.Think about your clients’ needs.
They want to start trading easily and pursue diverse risk management strategies. Aside from access to the financial instruments, they need indicators for technical analysis. In-house technology from the best providers guarantees flexibility.
4. Choose the Best Payment Methods
A Forex trading broker is expected to accept a wide range of payment methods to maximize convenience for clients. Please note that standard options like MasterCard/Visa, bank wires, or e-wallets may not work for companies with offshore licenses. This is due to the recent tightening of regulations in the industry. Fortunately, there are ways to get around this problem.
The best solution is a payment aggregator system with a broad range of accepted methods. Your customers need to be able to deposit and withdraw their funds instantly. An example of an efficient aggregator is PRAXIS Cashier.
Your CRM or Client Office has to integrate with your aggregator seamlessly. For instance, PRAXIS connects to 300 different PSPs (payment service providers). Over 1,000 methods are supported in total. Clients may use the services of tier-1 acquiring banks, electronic wallets, crypto providers, and automated payment machines (APMs). Such smart comprehensive solutions eliminate financial barriers at once.
How to Convert Leads to Traders
Generating traffic is your concern. However, it is also vital to turn those leads into loyal paying clients. A Forex trader can be frustrated by technical glitches, delayed payments, imperfect support, etc. Make sure this does not happen.
Forex brokers can automate client acquisition and payment processing by using the services of a Client Office aka Trader’s Room. It will integrate with your system flawlessly and streamline the following:
- auto-registration of every demo or live trading account;
- money transfers between accounts;
- depositing and withdrawing;
- KYC (Know Your Customer) onboarding, which includes identity verification and regular checks;
- Multi-Account Management (MAM);
- Percentage Allocation Money Management (PAMM);
- other social Forex trading features.
Aside from picking the right Forex white-label, you should also establish a solid presence on social media. Digital marketing is imperative for a Forex broker, as the Internet is the main conduit for leads. Even the most basic social media activities may attract traffic to your website. In addition, it is possible to build a network of collaborators via dedicated tools known as Introducing Broker (IBs).
The Bottom Line
Become a Forex broker and build a stable business that will bring you revenue for years. At present, a white label solution is an optimal choice for many startups. It will allow you to offer popular trading platforms and attract customers with smooth service. Finding the best platform on your own could be a real challenge. Consider consulting a trusted advisor or technology provider.