start a forex brokerage

Owning a Forex brokerage firm may seem overwhelming in the beginning. A forex brokerage registered in the Cayman Islands can be lucrative, and if you have experience with forex and connections in the community, you’re already off to a good start. 

7 requirements to start your own forex brokerage firm.

1. Business plan

You'll need a business plan for your brokerage. It is a requirement if you choose to register your firm with the Cayman Islands Monetary Authority.

Your plan should include the start-up costs, trade process, invested money, your competition, expected profits, and a risk analysis.

2. Financial Regulations

One of the first steps in starting your firm will be to establish a legal business entity in the Cayman Islands. You will also need to register your firm with the Cayman Islands Monetary Authority or CIMA for short. Your consultant will help you navigate the process. One of the benefits of a Cayman registered forex brokerage is that you do not have to have a physical office on the island. You would be able to accept customers anywhere in the world accept persons from the US or any sanctioned country. 

Hiring an experienced consultant, like Frank Nagy Financial Services, will greatly reduce the burden of setting up your forex brokerage firm. A good consultant will make the appropriate introductions with liquidity providers, software vendors, and provide financial management tools that will help your forex brokerage firm grow.

3. Website

Because most forex trading takes place online, you need a website that stands out and meets the expectations of forex traders. Some software providers offer website templates in their package. Choose a provider that will allow you to make edits and changes that set you apart from the competition.

4. Bank account

To run your forex brokerage firm, you'll need a business bank account. Unfortunately, offshore banks are sometimes hesitant to offer forex businesses bank accounts.

Work with a consultant who may have alternative solutions to combat this challenge. You may need to contact several banks before finding one that will work with you. Speak with your liquidity providers; they may be acquainted with banks that welcome forex brokerages.

5. Liquidity provider

Forex liquidity providers frequently aggregate liquidity for global banks, financial institutions, and other market makers. The liquidity provider you select has a significant impact on the spreads you can offer your clients. I suggest a provider that has been in business for at least 10 years and align your yourself with a liquidity provider that will help your firm grow. Your liquidity provider should have lighting speed execution to minimize slippage. If you intend on acting as a dealing desk or market maker, ask your liquidity provider and consultant to assist you in setting up your A and B book. 

6. Client portal

Your client portal (also known as a trader's room) is the software that your clients will use to view accounts, enter payment, view forms, and upload documents.

This software will be an important part of how you interact with clients, so choose one that has a friendly and professional user interface. If your forex brokerage operating in a region where multiple languages are spoken, it should also be available in multiple languages.

7. Back-office software

The backbone for every forex brokerage is their back-office software. 

The software for forex brokerages provides revenue calculation, fee management, compliance tools, partnership management, and other essential software for running your business. Through its Customer Relationship Management System or CRM the prop firm should be able to perform Admin Functions such as setting up Workflows, Receiving Leads, Allocating Tasks, trade parameters and risk analytics.

You will need to have a liquidity provider in place along with your CRM software as well as a technology bridge provider. A bridge provider will offer the technology to access (i.e. bridge) your global liquidity providers, order routing between A and B book and trader risk analysis.

Contact us to learn more about starting a forex brokerage.