Starting a forex brokerage of your own can be very exciting and a great business opportunity in itself. However, like with any business, make sure you’re putting some effort into laying down the groundwork for understanding what it takes to become a Forex broker. After this, you could come up with a good forex brokerage business plan that would be inclusive of key elements like where to register your brokerage and what trading instruments would you choose to offer. Spend some time assessing if it is a good idea to open a brokerage from scratch or choose a white-label solution. Keen to open a forex brokerage firm? Here’s a guide for you:
The ground-work
If you choose to start a forex brokerage from zero, be prepared to invest a considerable amount of capital along with time and effort to keep the business going. Below are some crucial steps that one needs to follow:
- Target Market
- Seed Capital
- Liquidity Provider
- Payment Processor
- Operations
- Pre-Launch and Going Live
- Target market
First and foremost, identify your target region first. When you know exactly where your customers are, you’d know where to set up your forex brokerage. Do not take this lightly since in this particular business, licensing requirements can vary from one country to another.
- Seed capital
How much capital you would require would be determined by the jurisdiction, however, you must be aware of this regardless of their requirements. Remember that setting up a Forex brokerage can be an expensive affair and you should ensure that you have sufficient funds to take care of the expenses.
- Liquidity provider
Liquidity is the sign of a great forex brokerage and hence you should connect with a top liquidity provider. Since you would be offering leverage to your clients, it is best to be associated with a renowned Forex liquidity provider who can directly access all Tier-1 FX liquidity venues.
- Payment processor
You would have to work with a trustworthy payment service provider who could facilitate effective competition in the market. It would also allow you to have various deposit and withdrawal options for the convenience of your clients. Additionally, if you may choose to offer cryptocurrencies, you might choose to have a cryptocurrency payment gateway that allows you to send and receive payments online in crypto.
- Operations
Forex broker website design, the platform you want to use and services you want to integrate would fall under this category. You would be required to establish an office at a physical location with IT and financial personnel, customer support, sales, and marketing teams, and compliance.
- Pre-Launch and Going Live
Keep reasonable time at hand to try out the forex trading platform, payment processing systems, mobile app, and other technical elements that emphasize on your target group who could be your customers once your brokerage goes live. This would make it easier to identify and address any concerns that may arise prior to the launch. After fulfilling these steps, if you have a good marketing campaign in place, you’re ready to take your brokerage live.
Choosing the right people
Having a good team in place gets half the work done. Getting a team that fits well could be much more beneficial than getting heavy funds since ultimately, your team is the one assigning these funds to the tasks. You may find it easier if you’re handling this on your own and all planned activities are executed by external parties. But this is where you should see if you’ve been in the business for long enough to avoid possible risks. Let’s assume that you have been planning to expand the business. In this situation, you will have to decide whether it is better to hire experienced folks from your competitors or pick a similar set of people from a different field of finance. With the former, you’d be able to ace what is relevant at present while with the other group you could approach the business in a fresh, never-seen-before way.
Business strategy
After you’ve figured out your market and target group, the following task would be to put a strategy in place. The strategy needs to take into account several factors, the major ones being marketing, client offers, and risk management.
- a) Marketing
How would you communicate to your target group? If you take into account the offline strategies, there is no one-size-fits-them-all here. What works for one area may not work for another. In some cases, marketing to your current client group is more than enough, whereas in other cases a branding campaign becomes important since potential clients begin to identify your trademark even before your sales team gets to them. It is easier to define the media to be used when the strategy is detailed. It then also becomes important to research prices. Do remember to account for plans for the creation of mt4 websites, landing pages, gadgets, and promotions.
- b) Client offer
Though it is crucial to reach out to your clientele, you should also be well-versed with what needs to be offered to them. Would they be trading on a few instruments or do they want more options? Would they prefer to trade on fixed or floating spreads? It is healthy to run your prices and offers with that of the competitors to assess their spreads and execution quality. This works in a similar way for all affiliates that you may have to connect with. Introduction rebates and conditions to keep you safe from unfair business partners must be outlined.
- c) Risk management
It is important to understand how you would earn and what risk factors would your brokerage be exposed to. You would come across several risk management practices since there are brokers on the market. The full A-book or full B-book ones are the most popular ones but hybrids are typically more common as they let you explore the market’s potential to its fullest. For such situations along with your risk appetite, your client groups, their experience, and your cash levels must also be assessed. It may even be better to use a particular approach in the beginning and change later when you have a better risk-taking capacity.