As the fastest growing and largest financial market, the Forex market has achieved a daily trade volume of $6.6 trillion in 2019 and the number is predicted to be even higher in 2020. Naturally, this pacey increase attracts more and more newcomers to the market, which are trying to get a slice of the pie. If you are also one of those searching for how to become a forex broker, you should notice that there are some regulations you have to follow even though the professional forex market is a decentralized trade zone. In order to keep the market integrity at the highest level and create a safe place for traders, obtaining a forex license is very crucial to start a forex brokerage business.
- What is Forex Licence?
Forex license allows brokers to legitimize their operations and establish credibility in the eyes of traders. To get a license, a forex broker should maintain a minimum capital requirement and meet the legal necessities, which signals to the traders that their money is protected and the broker cannot abscond with their investment. Here, the license fee can be seen as an expense, but the increasing inflow by having a legitimate business will definitely compensate it in the long run. This is not the only benefit of getting a license. To operate across the world and gain new clients regardless of the physical location of your brokerage business, you also need a legal contract showing by which regulatory body your broker is monitored. At this point, the license clears the path for increasing the scope of your company and targeting not only local traders but also investors from all around the world.
- Leading Forex Licenses
When you start your forex brokerage business, the most difficult decision to make is where to base your company. Choosing the right jurisdiction and finding the best possible license regarding your market target, your capital, expected time to launch your service, your bank account, etc. will have a huge impact on your future success. As the most reputable and confident jurisdictions, the USA, Japan, UK, and Australia are always at the very center of the forex market. It is certain that having a license issued by regulatory organs from those countries such as FCA, ASIC, and CFTC will make your company more popular among traders. However, these bodies dictate very strict regulations for the brokers which are very tough to meet especially in the early stage of the company. For example, the minimum capital requirement reaches $20 million in the USA, and client funds are expected to be completely segregated. As another disadvantage, it takes an average of 6 months to obtain a forex license in these jurisdictions. If you have a desire to launch your broker in a short time, then these jurisdictions may not be the best option.
- Offshore Forex Licenses
Another option that many new brokers would like to choose is getting an offshore forex license, which is more affordable than the first option. Seychelles, St. Vincent, Labuan, and Mauritius are some of those offshore jurisdictions providing extremely cheaper licenses. The main downside would be that clients and banks tend to work with brokers from higher levels of jurisdictions and you have to put more effort into expanding your number of clients, but it seems like a drop in the ocean considering the benefits. Usually, the tax rate is very close to zero and there are no limitations on leverage in these jurisdictions. These two main features give brokers so much space to move and adapt themselves to the changes in the forex market. Moreover, quick approval for licenses and a low amount of minimum capital requirements are what every broker needs when they start to operate.
After all this information, you may wonder how to figure out the right way to take to the stage of the forex market. There are lots of forex consultancy companies providing forex technologies with turnkey forex solutions and Qinox Tech is one of the leading companies in this field. The company delivers not only legal services such as obtaining the license from preferred jurisdiction but also payment and white label forex solutions for those struggling to form their business. You can check qinoxtech.com to thrive in the forex market.