Launching a Forex (FX) brokerage is an exciting business opportunity, but as with any business, important aspects such as the forex brokerage business plan, business registration, and the types of trading instruments offered needs to be considered. As a new entrant to the forex market, you have the option of building your brokerage from scratch or adopt existing white label solutions. However, the tedious and complex process of setting up a retail forex brokerage from scratch and high entry barriers has led many aspiring new entrants to turn to existing white label solutions instead to enter this lucrative market.
As one of the main problems that start-ups or businesses encounter is that they fail to recognise the cost of running their business which resulted in cash flow issues. This article will dive into the five key considerations of cost in forming a new brokerage.
- Staff & Employment Costs
Brokerage comes in all shapes and sizes. Some desire to grow at a global scale while others are only interested in managing a handful of their ‘inner circle’ clients. Different types of forex brokerage will determine not only how many staff to employ but also the specific roles to fill. At a minimum, a new forex brokerage will require to fill the positions of compliance, client support, accounting, and sales for the successful launch of the business.
- Technology Costs – White Label platform and Website
The business website and the trading platform for clients are the two main areas a forex brokerage needs to have. A website is critical for your brokerage as it allows potential clients to better understand the services you provide. Brokers may also want to consider a Trading Cabinet, such as the MT4 trading cabinet to complement their website. A MT4 Trader cabinet will provide your brokerage with a suite of tools that will help to automate a variety of day-to-day operations.
The MetaTrader 4 White Label is the most widely used white label solution with the brokers globally. With seamless integration with a variety of liquidity providers and the flexibility to tailor to your business needs, MT4 White Label is one of the popular choices for new businesses, a software that will power your brokerage.
In today’s competitive brokerage environment, it will be impossible for start-ups to attract new businesses and sustain growth without strong marketing efforts. Even with an existing client base, taking your business to the next level will require an investment in marketing. Moreover, marketing trends are evolving rapidly; what was effective only a few years ago may no longer yield similar results today. Rather than invest the time and effort into building your own marketing campaign, it may be more cost-effective to leverage on existing experts’ marketing knowledge and expertise as it relates to lead generation, traffic, and client acquisition.
- Incorporation, Banking, and Licenses Cost
Forex brokers starting off will have to consider the incorporation costs and renewal fees when building a budget for their brokerage. Additional fees that may be charged by banking and payment providers must also be factored into the equation as well. The final cost that new brokers must consider after obtaining the forex licence would be the rental, salaries, and regulatory and compliance-related cost since most regulators will require a physical office, local staff, as well as additional compliance and reporting.
- Liquidity & Risk Management
Generally, liquidity providers will charge a monthly fee for their services along with an additional charge for the total volume executed in their system. However, one should take note that should this trading volume fall below the minimum prescribed amount set by the provider, a further fee will be imposed. Thus, the final consideration is the pricing that traders will use to execute their orders on the trading platforms. Depending on the business structure, assistance with dealing desk management may also be required. Should there be a need to outsource risk management to other firms, this may incur an additional cost and a new brokerage will need to build into the budget.
The amount of considerations above may seem daunting and extremely time-consuming. However, by working with a trusted, experienced ally, start-ups can avoid costly mistakes and build a strong business fundamental that will support sustained growth. With more time on hand, start-ups can also focus on real business strategies.
Spearheaded by one of the world’s leading management teams, Desfran continues to stay on top of trends and movements in various markets to help our partners pursue their options for business growth. With more than a decade of experience, we provide a suite of business solutions which includes new market entry consultancy services, new market requirements like business incorporation and registration, bank account opening, marketing services, and regulatory compliance, all of which can all be fulfilled through Desfran’s bespoke solutions.
Contact Desfran today.