Trading volume exceeds $6 trillion daily in the Forex market, making it the world’s biggest financial market. Foreign exchange (Forex) is a global marketplace where different currencies are exchanged. The majority of volume in Forex markets is traded among large financial institutions, such as commercial banks, central banks, hedge funds, money managers, and large corporations. Private retail traders also trade currencies on Forex markets.
Investing in a Forex license is a great way to operate your own trading company legally. Obtaining a license without prior experience can be challenging, but it’s much easier if you get proper help.
There are 2 main reasons for obtaining a Forex license. First — a Forex license lets you manage your business in various regions around the world. Second — being a fully licensed Forex broker will greatly enhance the reputation and trust your customers will receive. It will also allow you to operate in countries that require a license for doing business.
Choosing a Jurisdiction
Starting a brokerage business and seeking a broker license will require a broker to choose the jurisdiction where their business will be registered. A number of factors, such as the price of the Forex license and the term up to which the license is issued, and the jurisdiction’s reputation, can be considered to determine the classification of each country.
The most sought-after Forex licenses are those in the USA and Switzerland since they grant access to high-profile clients. However, the licensing fees and requirements of both jurisdictions are very high. For example, US Forex brokers are supposed to have a minimum of $20 million worth of equity. It normally takes a license holder between one and two years to get one.
In comparison, the UK and Australia are less demanding regarding accounting and capital. A license in the UK takes approximately one year to issue and costs roughly $22 to $50 thousand; the minimum capital, for instance, is $100 thousand.
New Zealand, Cyprus, and Malta are other options. Belize, the British Virgin Islands, Cayman Islands, and Vanuatu are also listed. The affordable and straightforward process for obtaining a Forex license in these countries makes them the most popular among Forex brokers.
Which Jurisdictions Are Best for Forex Licensing
A Cyprus Investment Firm (CIF) license is required for becoming a Forex broker in Cyprus; the license costs between EUR 40,000 and EUR 100,000. It takes about six months to complete the process. CySEC is responsible for issuing the CIF Forex license. Cyprus is one of the most popular jurisdictions in the EU for obtaining a Forex broker license since it is highly regarded and has EU membership status. This means that brokers can access the entire European market. Companies also benefit from favorable taxes.
Over the past few years, Malta has been attracting many foreign exchanges and cryptocurrency companies to incorporate on its shores. Their cost-effective setup costs, friendly regulatory frameworks, and strong global reputation account for this. Malta offers different Forex license categories. The category two license will allow you to handle funds on behalf of clients but not to operate your trading facility. A category three license additionally allows you to provide investment services. The Malta Financial Service Authority (MFSA) is responsible for licenses to trade in Forex.
Last but not least is New Zealand, which has a good Forex license program for a meager price, compared to the top tier nations. The FSP in New Zealand issues a Forex license. New Zealand is also known for its lenient Forex regulation and competitive prices for Forex licenses, making it easier to qualify and maintain a license. Licenses for Vanuatu’s offshore sites are issued by the FSC, another popular jurisdiction in the Pacific Ocean.
How Does the Forex Licensing Process Work?
Our list of things to consider when applying for a Forex license in any jurisdiction is:
- Get a company registered;
- Gather corporate documentation;
- Provide state tax payments;
- Develop business plans, AML/KYC policies, and other documents;
- Apply for a Forex license with the agency;
- Set up an account with a bank.
There are slight variations based on the jurisdiction, but the overall picture is quite similar.