How to Become a Forex Broker

Many people wants to start their profession as a Forex broker. So in order to become a Forex broker one needs

Following things should be kept in mind in order to become a Forex broker:-

New set-up plan for a brokerage company include:

  • Registration of a new company in a local or offshore jurisdiction
  • In case one have a plan to do business in US then one needs to file an application for a Forex broker license at the US Security and Exchange Commission (SEC)
  • In order to collect funds from the clients one needs to open his bank account within the jurisdiction
  • If one is accepting online payments then one should file an application for this
  • Legal documents including dealing manuals and agreements, anti-money laundering policies, conflict of interest policies etc. should be prepared
  • In order to open a brokerage business one needs to pay registration fees and should meet a minimum capital requirement
  • In order to clear the grades the brokerage company should find the liquidity partners

Each and every step requires a set of documents to be prepared as well as some qualifications to be passed. According to the place of the registration of a company the jurisdiction package requirements will depend upon this only.

Registrants must prepare themselves for background investigation, pass examinations on general securities principals and state securities laws (NASD series 7, NASD series 63, 66). Following is the criteria which is being considered during the registration application:

  • Financial solvency
  • Conviction of a crime
  • Evidence of past inequitable or fraudulent business practices in a sale of securities

Related documents and links:

Guide to Broker-Dealer Registration by US Security and Exchange Commission (SEC)

Registration Overview for Retail Foreign Exchange Dealers, IBs etc. by National Futures Associations (NFA).

Forex Brokerage Roadmap by Boston Technologies.

Approximate cost in order to start own Forex company.

  1. Company registration- $2000.
  2. Opening a cooperate bank account- $500-$3000.

(The amount variation of larger banks require a minimum   account balance from $50,000-$5,00,000 USD).

  1. Opening a physical office- $10,000-$30,000.
  2. Developing a website- $1,000-$25,000
  3. Choosing a trading platform- $5,000-$1,50,000.
  4. Hiring staff (support, IT, legal & others) based on the local salary rates.

White labels and IB’s

One can start with an IB or a White Label solution from a Prime broker if one is not ready to buy his own Trading platform license.

One will be serving his trading services under his own company name as a White Label.

Customization of the interface and platform will be done by a Prime broker so that one can run the business under his own logo.

Prime broker will also have to arrange a trading server for the platform and clearance of all client trades for you. One can also leave the handling of deposits and withdrawals upon the Prime broker. One is left to do the marketing (to bring new clients) and customer support (to keep those clients).

As a White Label one will be able to customize his own fees structure and dealing spreads in order to earn higher income.

As an IB (Introducing broker) one will be sending/ referring all the clients to his Prime broker, so that he can eventually open a trading account. The only goal as an IB is to refer as many as clients to the Prime broker as possible because this will directly affect the income stream which will be earned for each refer client. This kind of business do not require any kind of licensing or registration. The only task one needs to do is to find and refer clients which can easily be done through any website, word of mouth including conferences and seminars by utilizing own existing client base data etc.

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