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Apr 03, 2020

Factors in selecting the Best Jurisdiction when Applying for a Forex Broker License?

  1. Budget

Of course, everyone wants the cheapest license possible so the majority of available funds can be directed to generating forex leads and infrastructure. Most offshore jurisdictions will offer the most affordable licenses, they are not always the most appropriate, so careful consideration needs to be taken on selecting the right jurisdiction that fits the needs of the brokerage.

The next consideration will be the amount of capital required and if this capital is needed to be locked in or not. Most offshore jurisdictions have reasonable capital requirements that do not tie up your capital.

  1. Which region are you targeting?

Usually a new broker will focus on one target market and geographic area initially until gaining more experience and building a reputation of a reliable broker. An offshore jurisdiction allows for flexibility as they are not restrictive to the regions of operation but it also comes with certain downsides. Such as image of the jurisdiction where licensed, but these can be managed and credibility can be built upon with the right business plan in place.

Due to the recent ESMA changes in Europe, brokers are looking to apply for new forex licenses in offshore or non-European jurisdictions. Although unlimited leverage is always desired, the majority of offshore licenses have no limits on leverage.

  1. Timeframe

Not all licenses carry the same delivery time. As mentioned previously, we are often asked for a license that can be obtained quickly. The challenge here is that it is often not easy to obtain a license in a couple of months. In fact, it could easily take 12 – 18 months to obtain a forex broker license in certain jurisdictions. Should you be looking to receive a license more quickly, then there are a few countries which process faster than others

  1. Business considerations

It is relatively easy to secure a forex broker license in a variety of global jurisdictions, both onshore and offshore. Banking, however, often poses a significant challenge. Due to changes in global regulations, stricter AML policies, and generally a more rigorous attitude toward new accounts, banking has become more challenging in the online foreign exchange industry. Before considering a specific region, it’s important to determine how feasible it will be to open a bank account.

Secondly the platform will you white label or purchase a license, it is difficult for start-ups to rationalise the purchase of a license at an early stage before the client base has been built but there are options which should be investigated. If you purchase the platform license server host should be as close as possible to LD4 or NY4 to provide low latency, this can be solved when you choose the right bridge to use which we can assist.

Lastly finding the right liquidity provider can be a challenge for new brokers, typically it is best to have 2 or 3 liquidity providers to optimise aggregation and for a new broker the minimum fees can be a challenge but we are here to assist on finding the right solution.

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