Tagging Forex IB and Forex White Labels, as well as individuals looking to start a Forex Brokerage.
Throughout the years allFX-Consult has been establishing and supporting Forex brokerages, it’s now more obvious than ever, that the lengths people will go to and the stories they fabricate to close business is more or less equal to the service they will actually deliver. To start a Forex Brokerage with or without an offshore forex license requires compromises and costs you’re most probably unaware of and comes with limitations no one will share in full, until you’re already on-boarded on a service.
A large portion of our client base in 2019, came looking for help in getting out of impossible situations other providers put them in. Frozen funds, blocked accounts, 2+ years waiting for a license that would never come, incorporated companies intended to become forex brokerages rendered useless because of banking problems and so much more…
Before we continue, keep this rule of thumb in mind:
“Never go forward with the first choice presented to you. Get second/third opinions and validate the information until you finally converge everything into a feasible next step”
Choosing a jurisdiction to rest your forex brokerage operations will play a significant role in what type of business you will attract as well as how far you can go with it, so it’s important to consider the reasons you’re expanding as well as your limitations. From what your target audience will be to what trading conditions each jurisdiction allows, detail your plan before you evaluate the possibilities.
If this plan doesn’t fit in any solutions currently offered in the industry, you can start by compromising certain aspects of it with short term solutions, always keeping in mind the bigger picture and working towards a medium to long term plan. Even if this compromise requires partnering, all of our setups get full autonomy (operate independent from other providers/brokers) within a maximum time frame of 2 years.
“Failing to work within a short term frame that’s part of a larger one, ensures stagnation and lack of growth. In 2-5 years, you will be exactly where you first started…”
So who is looking to start a forex brokerage?
The most successful cases we encountered, involved medium to large Forex IBs and White Labels (with consistent monthly deposit volumes between $100K to $1 million), looking to further enhance their operations by setting up their own Institutional structures. We’ve also seen smaller networks that also succeeded to start a forex brokerage with the support of external funding and a solid, down to earth business plan.
With trading conditions getting tighter in more reputable jurisdictions, offshore forex license alternatives sent everyone into a frenzy, thinking that it’s the solution to all their institutional problems. And in most cases it is… each jurisdiction comes with limitations though and you don’t want to spend 30K-40K on a setup, for them to be revealed. Moreover, just by registering a company (no license) in an offshore jurisdiction does not mean you’re good to go since you will be lacking a very crucial element, the bank account. Banks will not open a bank account for an unlicensed forex brokerage, no matter how hard you try. If you already did though and you’re stack, talk with us to look into your options.
To put things in perspective, here are some institutional options (with and without licenses) with their attributes:
Belize / Labuan / Cayman Islands / Seychelles / Mauritius / Bahamas / Vanuatu / BVI
- License: Yes
- Can be expensive to register and maintain, you will receive quotes from $25k-$50k
- Time frames to get a license and start: minimum 1 to 2 years mostly due to bureaucratic delays
- Solid banking structures and PSPs are working uninterrupted
- Physical office is a requirement, except Belize, Cayman Islands
- Belize – $500k
- Malaysia – $125k
- Bahamas – $120k-$300 depending on license type
- Cayman Islands $100k
- Seychelles – $50k
- Vanuatu – Security bond of $50k
- Mauritius – $30
- BVI – No capital requirement. Only proof of minimum 1 million in shareholder’s bank account to back up the company if needed
St Vincent and the Grenadines / Marshall Islands (This involves registration not a license)
- License: No
- Time frames to register/incorporate: less than a month
- No banking, no PSPs. People/Payment “specialists” might advise to use a paying agent (in most cases another company within the EU) but as the deposits start piling up you will need a truckload of excuses and finally you will be shut down. Also keep in mind that using a paying agent only transfers the banking problem to your paying agent so essentially you’re back to where you started.
- Capital required: No capital required
- Cheap to run but with no working banking structures, what will you do with it? (we have solutions for this but it’s a compromise – make sure to contact us to look into the details)
Use another offshore forex license as an umbrella – practically acting as a forex IB but with your own brand
- You can start immediately, no license required
- No start-up costs, no capital required
- Support from the licensed entity on the technical and banking level
- Since the licensed entity will be responsible for compliance, KYC, client funds and liquidity will pass from them so there’s no real client ownership
- You will be looking into a Revenue Share type of deal
Get a forex White Label using another offshore forex license as an umbrella
- You can start as soon as the White Label is created, no license required
- Start-up costs depend on the White Label providers usually between $5K-$12K
- Monthly costs (technical support) also depend on the providers, no less than $3K
- The licensed entity will still be responsible for compliance, KYC, client funds and liquidity will pass from them so again, no real client ownership
- You will be looking into a Revenue Share type of deal
Lease an offshore forex license
- Yes, this is also a possibility although rarely (almost never) offered
- Expensive to operate (not disclosing amounts here because each case is different)
- You need to prove you have existing flow of operations above $500K monthly
- Depending on how you attract business, the only requirement would be not to burn the license so you will be going through stringent evaluation.
- Could combine this with an agreement of buying into the company with each monthly payment. An expensive but excellent compromise with viable future, if it becomes an option.
Purchase an existing offshore forex license
- Buy all the shares
- Partner up and buy a shareholding percentage
- Costs between $100K-$250K
From experience, a combination of the above can do wonders and the saying “two birds with one stone” is the most accurate assessment when calculating the next step.
Fact 1: you don’t want to wait until you get an offshore forex license (that is IF you get a license, since central banks of offshore jurisdictions are causing massive delays in authorisations)
Fact 2: you don’t want to be a forex IB for the rest of your life, so you need to get ahead of your own game
When you weigh the cost of operating your own structure Vs sharing revenue Vs not doing either, you will see that it’s all needed but at the correct timing. No need to force one over the other when you can set it up with milestones and basically use it all… every tool in your disposal.
Last but not least, pricing/cost is important but shouldn’t dictate your every move.
Any experienced business owner can relate to the fact that “Complete setups come with higher costs and its normal. Lower costs mean incomplete structures that might (or might not) get the job done”.
How allFX-Consult can step into this picture:
Whether the decision is a full license (EU and/or offshore) or connecting with one of our partners, our solutions aim long term.
- Newly established forex brokerages with strong finance background and solid funding, offering very flexible terms to support their new ventures.
- Well established investment firms offering partnerships for tied agents, regional partners and more complex structures.
Alternative to full license – Start a Forex Brokerage by:
Connecting offshore: With clients in Belize, Seychelles, the Caymans, Martial Islands and St. Vincent offering the most flexible IB and White Label solutions.
Connecting in the EU: With clients in 15 out of the 28 member states offering strong partnerships to individuals and corporations with existing client base, looking to connect.
allFX-Consult always has a counterpart/partner for any corporate structure. Before we make any recommendations, we thoroughly examine all possibilities.
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