A forex brokerage business offers young entrepreneurs a promising future but has its own challenges. Starting a forex brokerage is not so different from starting any other business. From planning and budgeting to launching, you have to take similar steps to kickstart your business.
However, the part where most entrepreneurs face a setback that stops them from starting their business is trading infrastructure. Building a forex business from the ground up is not only costly but also an onerous task.
However, thanks to modern solutions, you can open a forex business without burying yourself under heavy debts. Two of those ways are IB and White-label forex. So, whether you’re a budding forex entrepreneur seeking insights or an inquisitive newcomer eager to understand the inner workings, you will discover how these two methods can help you realise your dream of having a forex business.
Embarking on the Journey: Unravelling the Paths to Forex Brokerage Launch
Setting out on a forex brokerage journey necessitates selecting a path corresponding to your goals. There are two ways you can take it: IB and White-label forex. Let’s get to both one by one.
- Becoming an Introducing Broker
The Introducing Broker (IB) position is an entry point that avoids the maze of technological and regulatory complexities, and it is the path of least resistance for aspiring entrepreneurs. To become an IB, you need to sign up with a reliable forex broker. Your primary goal would be to bring in as many clients as possible. And in exchange, you would earn a commission.
Advantages of Becoming an IB:
Below are the advantages of becoming an Introducing Broker (IB):
- Accessible Entry: Many aspiring forex brokers don’t initiate because they are scared they don’t have enough technical knowledge to succeed. IB takes the technology aspect out of the picture. Even if you have limited technological knowledge of the forex market, you can get a good start as a forex broker.
- Tech Support: The rising cost of infrastructure makes it difficult for new business owners to own any infrastructure. But with IB, you don’t need to buy any of those. Trading platforms, infrastructure, and integrations are generously provided by your parent broker, alleviating tech-related concerns.
- Client Acquisition: Your primary job as an IB is to attract clients. With no other task in mind, you can completely devote your hours to building a genuine and reliable client base. There are two benefits to this. First, you can leverage your existing network and experience to generate earnings without having to manage a professional brokerage business. Second, when you are ready to launch your own brokerage, you will be already familiar with your potential client base, and you do not have to search for an audience.
- Flexibility: As an introducing broker, you can operate without worrying about how you would manage complex technology, compliance requirements, or registration processes. Hence, you can focus on the core problems, such as marketing yourself as IB.
Disadvantages of Becoming an IB:
IB has some disadvantages. Below are some of them you should know about before signing up –
- Dependence on Parent Broker: While this path is simplified, it makes you reliant on your parent broker for execution and commission sharing. You don’t have an active role in the processes. Moreover, your broker’s performance will also impact your earnings.
- Risk Exposure: Relying solely on commission earnings exposes you to the risk of diminished earnings if your affiliated clients fail to flourish. There is only one mode of earning for you: the commissions generated from the trading activity of your affiliated clients. If your clients’ trading activity decreases or if they are not profitable, your earnings may be negatively impacted.
- Opting for a white-label forex solution
Like IB, a white-label forex solution will give you all the resources you need to launch your business, but it will also provide you with an additional benefit: the chance to build your brand. This requires some investment since you will be outsourcing the required services. A white-label forex solution is a great way to avoid the cost of building your trading infrastructure from scratch while building your brand image.
Advantages of White-Label Platforms:
Here are some of the advantages you will get if you sign up with a white-label forex –
- Branding: If you use a white-label platform, your forex brokerage will appear under your brand’s banner, ensuring brand recognition. This allows you to establish and promote your own brand identity in the market, which can help build trust and loyalty among your clients.
- Reduced Tech Burden: White-label platforms alleviate technical complexities as they come equipped with trading infrastructure. Hence, you don’t have to stress developing and maintaining your trading technology. The platform provided by the white-label solution already includes the necessary trading infrastructure; hence, you will save time and resources.
- Controlled Operations: With a white-label platform, you assume full control over all operations. You have the flexibility to customise and tailor the platform to suit your specific business needs. All the strategic decisions will not be executed until they have your say.
Disadvantages of White-Label Platforms:
Although white-label forex solutions offer more liberty than IB, they have some limitations. Here are some of the cons –
- Dependency on technology: While technology is streamlined, the speed of your venture may depend on the capabilities of the platform you choose. If the platform lacks certain features or fails to meet your requirements, it may limit your ability to offer your clients a competitive and efficient trading experience. So, make sure you test it out before releasing it to your target audience.
- Customisation Constraints: While white-label platforms offer customisation options, there may be constraints in terms of the extent to which you can customise the platform. This means that you may not have complete freedom to develop unique features or functionalities that differentiate your brokerage from others using the same white-label solution.
- Additional Responsibility: Beyond technology, navigating incorporation, registration, bank accounts, and more falls under your purview. This includes legal and regulatory compliance, setting up bank accounts, and following proper incorporation and registration processes. So, if you are ready to handle all that, you should consider white-label forex.
Building Your Forex Brokerage: Guiding the Way
Whether you choose IB, White-label, or any other way to build your forex business, it can’t be done without a roadmap. Below are the steps without which your venture can never properly take off.
Step 1: Determine Your Business Structure and Legal Requirements
Every business has a target audience in mind. It’s for forex traders in your case, but you need to be specific. There are different types of traders, each with different market needs. Who do you want to provide your services to? Do you want to make scalping easier for traders? Or do you want to provide services for Islamic traders? For instance, in the latter case, there are not many brokers that do not charge swaps. If you offer an Islamic account, you can build a niche audience while offering services that don’t hurt their religious sentiments.
Identify your target audience and the areas you want to concentrate on. Take all the necessary points into consideration from legal requirements and regulations that apply to forex brokerages in regions, do not leave anything that could halt your launch.
Some important things to consider here are the asset classes you wish to offer your clients, leverage, commissions, fees, and other trading conditions.
To accomplish all that, you should also select an appropriate trade processing model, such as an A-book, B-book, or hybrid model.
Step 2: Incorporation, Registration, and Regulation
The second step is to get your brokerage registered. But before that, you should know whether it is feasible even to launch your forex business. Different countries have different regulations that change over time. So, choose an optimal country for incorporation based on factors like capital requirements, taxes, and geopolitical considerations.
Additionally, do not forget to register your brokerage. You should get regulated by regulators such as CySEC for EU outreach or other regulators relevant to your target markets.
Step 3: Choose a Trading Platform and other technologies
Choosing which trading platform you want to offer to your target audience is where you spend most of your time. A platform is a direct medium for traders to access the forex market. From the most updated features to scalability, search for a platform that addresses both the needs of your business and your clients. It’s best to sign up with a technology provider that offers a comprehensive solution, including trading platforms, dealing desks, and order management systems.
Ready To Open Your Forex Business Yet?
Modern solutions offer two ways of launching your Forex business — IB and white-label Forex solutions. IB gives you a soft footing in the forex market by partnering with existing forex brokers, while a white-label forex provider gives you all the infrastructure you need to launch a forex business, giving you full flexibility to use it under your brand name.
Both have pros and cons, which we discussed in the article. Choose based on your capital, risk, and goals. Regardless of how you launch your business, follow all the steps we have discussed about launching your business to ensure smooth execution.
