Make Good Plans Before You Start Your Own Forex Brokerage

"Give me six hours to chop down a tree and I will spend the first four sharpening the axe."

- Abraham Lincoln, the 16th President of the United States

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Hey, you, I suppose you are reading this because you have already been a successful forex trader, or maybe you have been working as an IB for a period of time. With all the achievements you have made, you are probably thinking about maybe it's time for you to step into the brokerage game and start your own.

It could be a lucrative business, of course. But you know what they say, investing time and effort into planning and strategizing might help you get even better results.

Find the most suitable brokerage solution for yourself

Like we mentioned above, you are already off to a good start if you have had years of experience with forex trading.

So you must be no stranger to what a forex broker needs to run a business. Get a license, get software, which in most cases means MT4, get liquidity, get payment processing, and get regulated, among many other trivia things.

Now, before you do anything, you have to be aware of the fact that most start-ups are faced with two choices - they either run their own brokerage from scratch, or purchase all-in-one solutions from other forex brokers.

To start from scratch, you have to handle all the things mentioned above. But if you go with all-in-one solutions, also known as turnkey solutions, you are buying necessary infrastructure from one provider that builds the entire platform for you.

Or, and this is actually another way out besides the two aforementioned approaches, you could build your platform by looking for the most suitable solution provider to cater each need of yours individually, instead of getting the whole package from one.

I don't know if you are a gamer or not. A lot of gamers are building their own PCs instead of buying one from brands. You know exactly what you need for which type of games you play. You don't wanna get an expensive NVIDIA GeForce RTX 3090 graphics card just to play some indie games, do you?

The following tools are what matter to a start-up forex brokerage, take out your notebook and note them down:

Business plan with a target market

Legal requirements and financial regulations

Website and branding

Setting up your bank account

Connecting to liquidity

Payment processor

White label

CRM

- Making a business plan and knowing your target market

A business plan is always good for your brokerage. It doesn't have a format, you can write it on your own if you wish. But you need a plan.

How much costs are you willing to spend to ensure that your platform is operational? How will you handle the trades? What strategies will you adopt for competition? What is your expected profit rate? How do you manage risks? The list goes on and on.

If making a plan is like sharpening your arrows, knowing your target market is like knowing where you’ll be aiming at. In other words, your business plan will be better prepared and well-oriented if you are very clear about whom you want to do business with.

- Understanding legal requirements and financial regulations

Before you start a company, what you need to do first is to register a formal business organization. The options of your business may differ depending on your location and where you want to do your business.

If forex trading is what you want to offer, you might have to establish your firm in a country where a forex license can be granted. So, it is critical to be aware of the regulatory landscape for new forex brokers in the areas you're considering.

Now, with where you want to build your clientele in your mind, it is time to find suitable legal firms in the chosen area that could help you set up the company as well as the licensing procedures.

- Building a website and branding

You'd better have your website up and running when everything goes on track, and decide the way of branding for your company. The reason? Most forex trading takes place online, so a website that could stand out and satisfy the needs of traders is what you need.

In most cases, website building comes with a turnkey solution package. But I guess you don't want to share the same design that has been used countless times before you.

- Setting up your bank account

The reason you are doing business is to make money, so you'll need a business bank account for all the money you'll make.

But banks are shrewd, they won't just whip out a business account for you just because you said so. Especially unregulated forex firms, are having an extremely hard time setting up a bank account. So call around and look for help from your solution providers, who usually know where to find forex-friendly banks. As a matter of fact, many of those top-notch forex solution providers offer such services bundled with other bank-related services, so finding a good solution partner saves a lot of time and efforts.

- Connecting to liquidity

Liquidity in forex refers to how active the market is. For retail brokers, their liquidity is often pooled worldwide, usually from various financial institutions, mostly banks. Tier-1 liquidity providers, the market's top LPs, are usually the world's largest investment banks that have dedicated FX departments.

To make sure that your clients always get the smallest spreads, the liquidity connection you have matters a lot. Sometimes, turnkey solution providers might charge a higher markup than an LP would, but this is not always the case.

- Payment service

You will need to work with multiple payment service providers (PSPs) to ensure smooth deposits and withdrawals. In some cases, PSPs provide you with access to certain markets / countries where payment methods are different from the rest of the world. A fixed fee is usually charged each transaction.

Choose your PSPs that are well-known and have a proven track record and solid reputation.

- White label

MetaTrader4 (MT4) is currently the dominating online trading platform that is used to automate trading. But most new brokers are choosing to get a white label because a full license from MetaQuotes is simply hard to afford.

It costed 1,500 USD monthly for service and 75,000 USD to purchase the label of MT4 before January 2017. The monthly service costed 2,000 USD and it took as high as 100,000 USD to purchase the label after January 2017, and now it is unavailable.

- CRM

Customer relationship management (CRM) is a process in which a business or other organization administers its interactions with customers, and CRM software automaztes the process by helping you with keeping track of clients and lead interactions.

When choosing your CRM software, please assess that the firm offering the technology from head to toes. Buying CRM from another broker, on the other hand, might be a more economic choice, but it increases your data exposure to others.

Fazzaco Special Report

CRM: Accelerate Your Brokerage Growth

Conclusion

Look, I know that everything sounds overwhelming, even intimidating at first. But things will be lot easier to start up your brokerage if you break it down to smaller parts, and be better prepared.

​As a pioneering B2B platform, Fazzaco.com offers a wide spectrum of solution provider list in which there are always the ones you are looking for. Just put in the keywords, and answers will be coming to you.