The following article was exclusively prepared for LeapRate by the Match-Trade Technologies’ team.
According to Investopedia the foreign exchange (Forex) market is the world’s largest asset marketplace by trading volume and liquidity. This is one of the main reasons why its popularity has been steadily increasing for several years. To be effective and make steady profits on the forex market, you need to have in-depth knowledge of the market, good intuition and be a fast decision-maker. But if you already have experience in trading (especially as Introducing Broker, IB), understand the rules of the forex market and know the needs of traders, you should consider becoming a broker.
In this text, we will present selected solutions that will allow you to start your FX brokerage business the easiest and the fastest possible way without having to incur huge financial outlays.
Find a trusted FX technology provider
First of all, time is money and you don’t want to overpay. That’s why, regardless of your experience in forex business you should start by finding a partner, be it, forex consultant or technology provider. Look for companies which operate as FX one-stop-shop offering assistance in completing formalities, providing technology and IT support and turnkey solutions that will help you acquire customers. Remember to pay attention to future costs as it will have a crucial impact on your FX brokerage business.
Register a forex company
To conduct your forex business according to all legal requirements you must register a company. There are three types of legal jurisdictions for forex services (unregulated, semi-regulated and regulated) varying in license cost and scope.
- Unregulated jurisdictions – countries like Saint Vincent and the Grenadines or the Marshall Islands don’t have special regulations for forex services and registration is just a formality. 9 out of 10 FX brokers use this option since it’s hustle free – the cheapest and easiest to obtain. But it doesn’t give the right to operate on the biggest markets e.g. European and can cause some difficulties in relations with banks.
- Regulated jurisdictions – these are the European Union countries with the UK and Cyprus being the most popular. Registration of a forex company takes months (at least 6) and its cost exceeds $100k. And it doesn’t include the cost of high-qualified staff and legal services to proceed complicated reporting. But with price comes benefits. A regulated broker can operate in the largest markets without any problems with banks and other financial institutions. Besides, such a license raises reputation and broker’s trust. Unfortunately, it’s only achievable to large businesses.
Choose the best FX trading platform
There are several trading platforms on the market, the most popular like MetaTrader4 and MT5 and cTrader or less known but equally good xStation, Utip, Match-Trader. When starting your own forex broker without a big budget to invest you should consider a White Label solution, and the most reasonable choice client-wise would be MT4 WL.
As a White Label Broker, you can operate under your own company name, although MetaTrader White Label offers limited branding options and basic, shared mobile app. On the other hand, MT4 offers an extensive system of EA (Expert Advisor) trading bots which makes it the most chosen platform by traders.
While choosing a trading platform you need to find a solution that will be the best for you. Apart from startup costs you also need to estimate your ongoing costs as it can significantly decrease your profits. Consider a solution provider with a flat monthly fee, who doesn’t charge a turnover fee. Also, look for a provider who offers in-house technology as it will guarantee flexibility. That’s why it’s so important to have a trusted advisor or technology provider who will help you set up a solution tailored to your needs.
Of course beside setting up a white label brokerage you also need to consider hosting and IT server maintenance. Cost-wise it is best to pass the support and hosting of your MT4/MT5 server to your FX technology provider. This guarantees a 24/7 monitoring minimizing the risk of a shutdown which could harm the broker’s image.
Convert Forex leads to traders
Equally important to choosing a trading platform is creating a website for your brokerage and establishing social media accounts. Marketing activities are necessary to acquire customers and even basic social media activities can significantly increase traffic to your broker’s website. You can also expand your reach by building a network of collaborators using Introducing Brokers (IBs) tools.
But traffic isn’t enough. To make your FX brokerage successful you need to convert those leads to traders and make sure they’ll become loyal customers.
How to keep your customers active?
Improve their flow by automating onboarding and payments. Find a Client Office also known as Trader’s Room solution that will work seamlessly with your chosen WL allowing your customers:
- open a new demo or live account automatically,
- transfer money between accounts,
- send deposits or request withdrawals
- proceed with KYC onboarding procedure
Also, solutions like Multi-Account Management (MAM), Percentage Allocation Money Management (PAMM) or any feature supporting Social trading can help you expand your FX business.
Payment methods for your FX brokerage
And last but not least, very FX Broker has to provide their customers with convenient and effective payment methods. Standard methods like card payments, bank transfers or popular e-wallets (e.g. PayPal) won’t work for brokers using offshore licenses due to industry regulations tightening.
How to handle clients’ payments after FX industry regulations tightening
The best way to solve this problem is to use the payment aggregator system. Choose a solution with extended payment options allowing your customers proceeding instant deposits and withdrawals. Find a Client Office/ Forex CRM solution integrated with a PPS aggregator (e.g. PRAXIS Cashier). It allows access to 300 different PSPs, it supports over 1000 various payment methods, including tier-1 acquiring banks, e-wallets, APM’s, and crypto providers. A tool like this will solve all of your problems with payments.