Sooner or later IBs and even common FX traders start thinking about launching their own forex brokerage. And it shouldn’t come as a surprise because running a forex brokerage is a tried-and-tested way of making money. But that’s true only if you approach it wisely and carefully.
In the following infographic, we’ve included an estimated timeline with all the stages of opening a forex brokerage from scratch.
Before registering and incorporating your brokerage business, you need to think through your business model. Clients from what countries are you going to target? What trade-processing model are you going to adopt? What trading instruments are you going to offer?
Answers to all these questions will help you lay a foundation for your business model and figure out the best region for incorporating your forex business.
After you figure out your target market, you’ll be able to calculate the funds you’ll need to establish and run the business, including capital requirements, the size of the guarantee fund, taxes, and government fees.
Depending on the country you choose to register your business in, you’ll also get an idea about local requirements for reporting, professional qualifications, background checks on you and your partners, and compulsory personnel.
In parallel, you can start working on registering your business with a regulator. Although it’s not mandatory in some jurisdictions, being a regulated broker raises you in the estimation of your target audience and increases potential user attraction.
Another major milestone is choosing the asset classes you’re going to offer to your clients and the trade-processing model you want to apply.
With asset classes, it’s easy, the more you offer, the broader your audience is, as well as your opportunities to hedge clients’ positions in various markets.
However, a trade-processing model requires more consideration due to its significance in terms of risk exposure. There’s a struggle between playing safe by sending all orders to liquidity providers for execution and a wild desire to trade against your clients for larger profits.
We recommend reading our e-book The ABCs of Price Risk Hedging – How FX Brokers Manage Their Price Risk to figure out what works best for you.
As a technology provider, we also offer in-depth info on the software you’ll need to launch and run the forex brokerage (spoiler: get a tried-and-tested turnkey trading platform from a reliable software vendor). Choosing the right platform is also intertwined with many aspects: asset classes, a trade-processing model, registering with a regulator, and even marketing.
The last point we mention (but not the least) is hiring personnel. There are your needs as a forex broker and there are also requirements of the regulator you’ve chosen.
Take your time and do your research, and, who knows, maybe someday, you’ll find yourself in the position of a well-established broker running a lucrative business!