Many startups and entrepreneurs are drawn to the Forex industry and in particular, show interest in opening an online Forex brokerage, which, in most locations, requires a Forex Broker License or securities dealers license.
The opportunities for business in the Forex market are vast. An online Forex broker gives traders access to a platform that facilitates the buying and selling of different currencies. These transactions always take place between a ‘pair’ of currencies and traders seek to profit from fluctuations in value. This market which was once only available to professional or experienced traders is now available to all via online platforms and apps.
Forex Market
Forex MarketThe foreign exchange (Forex) market is the world’s largest and most liquid financial markets. It has a daily trading volume of around $6.6 trillion. This makes it even bigger than the leading stock markets such as FTSE and NASDAQ. In addition to this, some 9.6 million people trade Forex online regularly, that’s one in every 781 people on earth.
Volatility in the world’s markets has made millions of new traders sign up to online platforms. Some estimates state that trading activity has increased by as much as 300% during 2020– a previously unprecedented increase. It seems unlikely that all these new users will stop trading in the future. Rather, the number is expected to keep increasing while retaining a high percentage of traders.
Starting a Forex Business
You may be one of the 9.6 million people that trade in Forex, but what about going a step further? In this section, we’ll look at how to start a Forex business and how to acquire a Forex broker license. Starting a Forex business isn’t easy but with the right help, it can be achieved.
First, you need to get ready to make a lot of decisions and choices. You should also be aware of some of the risks and obstacles involved. Each step of this process will ultimately impact whether you are successful or not in your Forex business.
The first decision you’ll make is by far the most important, and that is where you will base your operations. Pick a jurisdiction where Forex activities are legal and regulated, that suits your budget, timeline, and tax optimization objectives. If you rush and pick the wrong jurisdiction, you can end up making some very costly mistakes. This is not a decision that should be taken lightly.
Fast Offshore can match you with the right location for your offshore Forex license. Take advantage of our extensive experience in the offshore business, licensing, and Forex to pick the most suitable option. We’ll evaluate your business plan including budget, target audience, and individual circumstances. Then we’ll suggest the best option for where you should incorporate and where you should apply for a Forex broker license.
Why should I pick an offshore jurisdiction for a Forex Broker License?
Why should I pick an offshore jurisdiction for a Forex Broker License? Offshore jurisdictions offer a range of benefits that you don’t get with onshore. Each jurisdiction differs with the benefits but here are some “across the board” plus points to going offshore.
- Licensing processes in offshore jurisdictions tend to be more straightforward and less paperwork heavy than onshore jurisdictions.
- Acquiring a Forex broker license in an offshore jurisdiction is often quicker and more cost-effective.
- A quicker licensing process means fewer costs incurred. You can get set up and be profitable in a shorter period.
- There are also lower capital requirements when you incorporate and start the licensing process. This leaves more cash to invest in other areas of the Forex business.
- Many offshore jurisdictions have favourable tax regimens. In some cases, there are zero taxes payable on revenue generated by the Forex business. Be sure to discuss tax-optimization with Fast Offshore before you pick a jurisdiction.
- There are cases were operating in an offshore jurisdiction can provide greater levels of privacy for the beneficial owners.
- You can enjoy greater security for your business by incorporating your Forex broker offshore. This puts it out of the reach of creditors and lawsuits.
Which benefits apply to you will depend on your circumstances. To find out more, contact Fast Offshore today!
Where to incorporate your Forex Brokerage Business?
So what are the prime jurisdictions for offshore Forex licenses? Based on our two decades (and counting) of experience, the ideal offshore jurisdictions to get a Forex license are:
Which of these is the best fit for you will depend on factors including your business goals, what kind of brokerage you want to run, where your clients are located, your budget, timeframes, tax, reporting obligations, compliance, and the ease of conducting business from within that jurisdiction. There is no such thing as “one-size-fits-all”.
You also need to be aware of whether the jurisdiction you choose requires licensing for Forex activities. To make sure you are in line with local laws, it’s vital you partner with a professional like Fast Offshore who can make sure you are taking the correct steps.
How to get a Forex Broker License?
Following discussions with your corporate service advisor, you should have chosen the jurisdiction that is best suited to your requirements. Now it’s time to get the ball rolling. The next step is to consider the different business models in the Forex business, then and start the company incorporation process and file the application for an offshore Forex license, if applicable in the jurisdiction you’ve picked.
Pick your business model
At this stage, you need to think about which model you wish to use in your Forex business.
- Market Maker model: In this model, the company takes the risk during trading. It will set both bid and ask prices on their own platform and display them publicly. They also make transactions for their customers and provide liquidity to the market.
- Agency Model: The Agency Model is where the broker acts as an agent, accepting orders from clients and then sending them to liquidity providers. They act as simple intermediaries and do not execute trades themselves.
- Hybrid model: The Hybrid model is a combination of the above.
You should also create a business plan and financial forecast that includes all of your operational costs such as rent, utilities, website, design and development, marketing, and HR.
Company incorporation
Once you’ve decided on a business model, it’s time to incorporate the company. This company will act as the legal entity of operations and will be set up in the jurisdiction you’ve picked and decided to be licensed in. Depending on the jurisdiction you choose, there may be different corporate structures to choose from and which one you use will depend on your requirements.
At the stage of company incorporation, matters such as registered office, directors, shareholders, and capital will need to be decided upon. You will also have to provide information such as passports, references, proof of address, and information on the company structure and purpose.
Setting up a company including opening bank accounts, finding a physical location, and compiling all the documents required can take some time, so be sure to factor this into your timescale.
Application for your Forex Broker License
In jurisdictions where you need a Forex broker license, you will have to apply for the license before you become operational. This means that you need to apply for all supporting documentation with the applicable regulatory body. This then needs to be approved before the business commences work.
Each licensing process is different but as a standard, you will have to:
- Pay a fee
- Provide identity documents
- Provide proof of address
- Offer bank and professional references
- Include your CV
- Criminal record check
In jurisdictions where licensing is not required, there are still certain obligations you need to meet so be sure to check with Fast Offshore before you start trading as a platform. Following the approval of the license, you will also have to set up payment and settlement accounts and engage payment processors to handle online payments. These entities will require information on your license and company before agreeing to offer you their services.
Ongoing maintenance
Once you have your license in hand, you are almost done in terms of setting up your Forex business but be sure not to neglect ongoing maintenance. Most jurisdictions will require that you provide periodic reports and statements of some kind. You may also have to renew your license, pay annual company fees, and report on taxes and revenue. The Fast Offshore team can assist you with all your ongoing obligations in the jurisdiction you are located in.
Important Tips Before You Get Started
Before you ‘go live’ here are some additional tips from Fast Offshore for you to consider.
Be transparent
Being transparent is one of the most important parts of the business and is something your customers will judge you on. Make sure you operate a secure and safe platform and assure them that their personal information is kept private. Client data must be kept safe and be protected from hackers and nefarious third parties. If leaks or breaches occur, tell your clients and let them know what processes you’ve put in place to stop it from happening again. Safety is an important part of running an offshore Forex broker and you must have adequate processes in place to protect both the client and yourself.
Consider liquidity
If you are a startup broker, you need to make sure you have adequate liquidly to execute clients’ trades, but also to make payments and honour withdrawals. If you are unable to do this or are delayed when dealing with such requests, this will reflect poorly on you. You could also be at risk of losing your license.
Be savvy with marketing
The Forex market may be booming but there is still plenty of competition out there. You need to make sure you stand out from the crowd and attract the clients you need. This can be achieved through smart marketing and business development. Utilise social media, content marketing, online forums and other platforms, messaging apps, email and sponsorships to ensure you get the reach you need. Make sure you do your research on your target demographic to display content that will appeal to them in places they will see it.
Go mobile
While a sleek, smooth, and functional website is essential to your Forex business, you need to have a mobile application as well. Mobile is the future and more and more traders want to be able to execute trades on the go from their devices. Make sure your app offers all the functionality of the website, is free to download, is secure, and works well.
Offer great customer service
Last but not least, you’re Forex brokerage needs to offer an exceptional level of customer service to clients. This should happen through multiple channels including social media, phone, email, and in-app or in-website direct messaging. You can use chatbots to funnel enquiries and to pick up the slack during the evenings or busy times. It’s also important to consider offering multi-language support so all customers can benefit. Good customer service increases brand loyalty retains clients and helps to reduce chargebacks.
Contact Fast Offshore to get your Forex Broker License
Getting your offshore Forex license of securities dealers license may not be straightforward, but it’s worth it. At Fast Offshore, we can take you through the whole process and assist you in making important, informed decisions. We’ve helped a growing list of clients apply for and acquire Forex licenses and incorporated their Forex company as well. We have over two decades of experience in Forex and corporate services meaning we can take care of every aspect of the launch. From bank accounts to payment processors, compliance to taxation, we have got you covered.
The industry is booming, don’t leave it too long to start your Forex business, contact Fast Offshore today!
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