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Thinking about starting your own Forex Brokerage? The first logical question is "Where is the best location to incorporate and license your broker?".
However before we proceed on to answer this question, there are other related questions a person who has a serious interest in opening his FX Brokerage needs to answers.
Q1) Which regions are your going to concentrate on for retail clients?
Q2)When do you plan on launching your company & product?
Q3)How much money do you plan on establishing your brokerage?
Q4)Which business model are you going to have ? (STP,Market Maker,DD,Mixed)
Q5)Which bank will open you a corporate bank account?(depends on license & country of incorporation)
Q6)How're you going to collect the payments from your clients?
For the purposes of answering the question, we will divide certain geos(regions) in Tiers based on the level of reporting, capital requirement & tight regulated environment each jurisdiction has.
1) Tier 1 :
To safeguard investors from fraudulent and ponzi schemes, many countries have established private or state owned organizations to monitor and regulate the Forex Market and are actively supported by the governments. Example of countries in this Tier are JAPAN(FSA JAPAN) & USA(NFA & CFTC).
There are profound reporting requirements, broker required to provide high quality in services and prove the availability of $20 Million USD of free liquid capital not including clients money. There is also a compulsion to have local offices and a significant membership fee as well.
2) Tier 2:
Regulations like FCA UK & ASIC Australia fall under this category. These jurisdictions require lower initial capital and are committed to reporting. Obtaining a license from these authorities may take anything between 6 months to a year depending on how fast the required documents are submitted.
Applying for a license from these regulatory authorities typically requires one to have a minimum of $100,000 USD of non client funds. The cost for this is approximately $35,000 to $50,000(depending on what license you take) for example if you plan to have a Dealing Desk which doesn't forward the liquidity flow to a third party then you need to show a high availability of disposable liquid funds available approximately $1 Million USD where as for STP(Straight Through Processing) models where you forward all the liquidity flow it's about $100,000 USD.
Offshore with certain level of protection for investors like Cyprus(CySEC),, Malta(MSA), New Zealand (FSP) are the Tier 3 jurisdictions.
These regulators require the availability of a local office, simpler reporting & very low taxes. Specially Cyprus which offers good access to EU and is also ESMA compliant. The cost for CySEC range from 125,000 Euro to 750,000 Euro depending which model you're going for STP or Dealing Desk and the process time remains on par with the Tier 2 regulators.
BVI, Marshall Islands, Belize & Seychelles are the Tier 4 jurisdiction and have a official regulation and license the broker needs to obtain if providing FX Instruments. Obtaining a license and getting a license usually takes 3-4 months and cost around $20,000 to $30,000 USD with a $500,000 USD in capital requirement(Belize). Also with these licenses it's easier to open and maintain a bank account.
There are certain offshore jurisdictions Like St. Vincent & Grenadines or Bermuda where there getting a Forex license is not compulsory. Setting up a company needs only a little capital and the money saved can then be used on operations or marketing.
It's a bit difficult to obtain an account in a credible bank for Tier 5. Most startups go around this issue by listing their company for more than one service for example Consultancy, Marketing,FX, Travel etc or through EMIs which can provide an online IBAN. (B2B accounts mostly).
Many big brokers around the world start with small licenses and obtain their bigger licenses much later such examples include big names like Alpari, Admiral, Primus etc.
To keep up to date with the latest trends in FX industry or info on brokerages or white labels visit Stratton Forex. We'd love to hear from you.
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Belize is an independent country, located in Central America and it borders with Mexico, and Guatemala. In terms of time, Belize Forex License can be obtained comparatively quick. Moreover, Belize enjoys good reputation in the sphere of financial services and is widely known to international banks and payment providers. The IFSC Forex license of Belize is recognized by banks, Payments services providers, as well as Forex trading Platforms; THIRD: Requirements. Belize IFSC issued licenses for Forex Trade will need to deposit (US$100,000 required) in a local Belizean bank during the initial periods of application . For this purpose a bank account in a Belize bank will need to be opened at the beginning of the A forex license in Belize may be obtained relatively quickly and at a reasonable cost. Belize is considered to be a well-regulated jurisdiction that will satisfy international banks and payment service providers for account opening purposes. The minimum paid up capital required for the Belize Forex license is USD 100,000. This sum should be deposited in a bank in Belize. (We assist with the Belize FOREX License. International financial services business is regulated in Belize by the International Financial Services Commission (IFSC). Different kinds of financial services, including trading in foreign exchange / ForEx, in securities and financial instruments as well as brokerage, consultancy and advisory services for these can be carried out by an International Business Company In order to receive a forex license in Belize, the broker must first establish an International Business Company (IBC). Prior to setting up the IBC, we’ll require some basic information about your brokerage: identity documents of all shareholders, intended structure, and the desired business name are just a few examples of the requirements. Belize ForEx License – special license financial services can be carried out by a Belize company.License is required for the following types of activities: Trading in Foreign Exchange (Forex / FX) Trading in financial commodity-based derivative instruments and other securities (futures, options, interest rates, shares, stock, contracts for differences etc.) Belize is such a country and is one of the most open and attractive economic zones for a variety of international transactions. Entrepreneurs who intend to get a Forex license consider Belize as one of the most appropriate and applicable solutions. This country is also perfect as a platform for entrepreneurship held by investment companies
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