When you are going for your own broker, the income becomes more predictable and the risks are managed better. Let's find out how to open your broker.

Checklist You Need to Know Before Starting Your Own Brokerage

The amount of people interested in FX trading is growing day by day. However, nowadays it is pretty difficult to find an honest and trustful broker. Well, where others see a lack, entrepreneurs see an opportunity. If there are no decent brokers available or their quantity just seems to be limited, perhaps it could be a great idea to actually start your own brokerage.

If you are a trader, there are a few reasons why you would want to do it. First of all, trading is exciting, but it may become a routine. It is common to see traders with years of experience feeling burnt out. Unfortunately, there are not many jobs the traders can do, considering that the job should be paid at least similar to what trading provides.

Next to this, as a trader, you certainly know how to appeal to other traders. You have seen a few brokers, you know their mistakes and their strong points. With this knowledge, you can easily develop a broker that will be able to be useful for other traders.

Finally, when you are going for your own broker, the income becomes more predictable and the risks are managed better. Let's find out how to open your broker.

 

Essential Checklist

There are a few items that every broker needs to have in place. There are the must-haves:

  • Company
  • Website
  • Trading terminal
  • Liquidity
  • Office
  • Personnel

Even though the items above may look simple, there is quite some complexity involved. For example, when working on your company formation, you may go for a licensed and regulated brokerage or you can choose just to register a company in the offshore zone. Both of these choices have their own pros and cons, but the costs differ substantially. An offshore company can cost a few thousand dollars while opening an entity regulated by FCA (UK) can cost as much as $300,000.

Website is usually outsourced. However, the cost of it can vary significantly too. If you have no knowledge of web development - you can be easily overcharged too. Usually a website costs between $1000 and $50,000, depending on the items you want to include and the subcontractor you can find.

Trading terminal and liquidity are the core concepts of your business. You are simply unable to operate without those. Once you end your trading platform, you have to know that you only the software itself. You will also need to find various liquidity providers so you get the feed of prices in your platform. The feed can cost quite a lot though, for some instruments it could be over $1000 per month.

Hence, it is strongly recommended to actually for the platform that comes with integrated liquidity. There are not many choices and to date, only UTIP has demonstrated a stable platform that comes together with its own pricing feed. Best of all, it also costs a moderate amount of investment. With UTIP you can get started from $15,000, while such platforms as MetaTrader 4 will cost around $100,000.

In most cases, you will need an office. It is cheaper to manage your team online, however, it is recommended to have core people concentrated in a single location. This is where another need arises - staff. You can hardly start a brokerage on your own, you will need support officers, financial managers, and so on to get started.

 

Secondary Checklist

Next to core items, you will also need some supportive investments to make. Those usually depend on the strategy you want to implement to attract the clients and may involve one or more of the following:

  • Customer Relationship Management (CRM) system & sales team
  • Affiliate portal
  • Creatives & marketing division

There are various ways to get traders to your brokerage, but the main ones are listed above. You might go for a call house with an established CRM system and start doing cold sales.

Alternatively, you can rely on the affiliates to build the business for you. To do so, you need to provide the affiliates with proper commissions and the right tools to do their task.

Otherwise, you can build up your marketing team internally, and its core task would be to bring converting traffic to your website.

Most of the large brokers are actually focusing on all of the three aspects above, yet it is still possible to see the brokers only going for one of the methods listed above.

Setting up your own broker takes significant experience and resources. You may surely walk this path alone, but sometimes it is better to trust the professionals. Such companies as New Broker assist in getting your brokerage up and running.

 

This article is contributed by Forex Bonus Lab, a website dedicated to the most recent Forex bonus offers and the reviews of the leading brokers.