Two last covid years show everyone how financial markets can thrive during crises. The fact is that a lot of new brokers have appeared over the last two years, and a huge number of traders have made money in volatile markets. We noticed an interesting tendency: some traders decided to open their own brokerage companies, because they realized they can earn much more if they work as a trader and broker at the same time. The reasons are that now opening a brokerage company is affordable for everyone and there is a great time now!
There is a common misconception in the Forex world that starting a brokerage business requires large investments both time- and money-wise. Even though it is not true, many people fall for this myth and become Introducing Brokers (IBs) when it actually would make more sense for them to try their luck at achieving genuine success and to open their own brokerage firm. That is why we are publishing a detailed guide on how to start a Forex brokerage firm.
An IB job description seems much easier than the broker’s. They specifically focus on lead generation and are not required to do all the seemingly difficult stuff, such as trade execution and payment processing. Seems like a good deal for half of the broker’s profits, right? Not exactly.
If you have ever thought about becoming a White Label Forex broker, this article is for you. If you have never heard about White Label Forex brokers, this article is also for you. This option allows you to keep all the revenue by building a ready-made solution based on the combination of White Label MetaTrader 4, Forex CRM, and Liquidity provided by UpTrader for a small monthly fee. You can launch your own brokerage firm with just $4000, which is hard to even imagine for somebody who started a Forex business a decade ago.
1. Define your corporate framework
A company begins with registration. This process is fairly straightforward but not without its inconveniences.
When starting a company, it is important to lay down a good foundation. In our case, choosing the jurisdiction right. Instead of naming the first country that comes to mind, you need to compare different jurisdictions in terms of what they can offer to entrepreneurs.
Offshore is a popular choice due to flexible legislation combined with no taxation. Moreover, foreign business owners often receive an unprecedented level of support if they have a legal entity registered in Saint Vincent and the Grenadines, for instance. Sounds rather appealing, doesn’t it?
2. Secure a trading platform
Done! By now, you have surely heard of MetaTrader. It is the most popular trading platform in the world that is used by most brokers. It has built its reputation on reliability, exhaustive options for setting trading conditions, technical analysis tools, and familiarity to traders from all over the world.
MetaTrader has two versions, MT4 and MT5. Both are designed as platforms for Forex trading, financial market analysis, and consultations with experts.
3. Connect to a FX liquidity provider
After getting a trading platform, it is time to concentrate on finding your liquidity provider. What is it and why does it matter? A broker’s earnings consist of a difference between the spread of their liquidity provider and the end spread for traders. Therefore, it is in their interest to secure a reliable liquidity provider that can guarantee the tightest spreads, allowing them to hedge risks.
Another setup allows brokers to bypass intermediaries and act as counterparties in client trades without large market makers participating. In this scenario, clients spending their deposits quicker are more lucrative for the broker, entailing two risks: reputation losses as clients might think that the broker only wants to ruin them and bankruptcy risk coming from professional traders who could earn large sums. We advise to draw a balanced risk management strategy to combine the best from both worlds.
4. Get a Forex CRM
One could argue that the headstone of a modern and successful brokerage firm is a back office system allowing brokers to communicate to clients and clients to manage their accounts and deposits in real time. It is certainly helpful for the broker if all the client information and history is stored in one place.
And while choosing a trading platform might be straightforward since there are only so many options on the market, picking Back Office and CRM systems might turn out more difficult than you think. The options are plenty but not all of them are created equal.
Many brokers go for a general-purpose Forex CRM system but those do not cater well to the specific needs of brokerage companies. After all, managing goods in warehouses and their logistics is not the same as managing trading accounts.
CRM systems designed specifically for Forex brokerage systems are available on the market. However, these solutions in their majority were developed by other brokerage firms in-house first (and therefore, are tailored to their needs). Few exceptions from this rule are modern brokerage SaaS CRMs that are customisable, like UpTrader Forex CRM.
5. Launch a Forex website
Finally, a successful brokerage cannot exist without a modern responsive website. You can develop one yourself or commision it.
There you have it! You are only five steps away from keeping all the profits to yourself.
