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Date: 4/08/20

Acquiring Forex license: basic requirements for forex brokers

The estimated volume of forex market today is trillions of dollars, leading to the great popularity of forex brokers on it, but without a forex license, a brokerage company has is banned from processing traders’ transactions. The activities of brokerage companies that do not have a forex license are considered illegal and unsafe, and traders bypass such companies.

Each jurisdiction has a regulator that controls transactions in a given market and provide licenses for brokers. These institutions can raise a lot of questions concerning the brokerage company. In any case, if a forex broker does not want to get problems with regulators or desires to acquire new clients, forex license is the main option.

Jurisdictions to look out for:

The first question for a forex broker is the choice of jurisdiction in which a beginner forex broker will be able to register a business and obtain a brokerage license at the best price and in the shortest possible time. Taking into account such factors as price, the period of obtaining a forex license and the reputation of the jurisdiction, all countries are divided into several categories.

Category A countries: USA and Switzerland. These jurisdictions are the most prestigious, and licenses for forex activities obtained from local regulators open access to clients with the greatest financial capabilities, respectively, the requirements and prices are also high. The minimum equity capital of a forex broker in the United States should be $ 20 million. The term for obtaining a forex license is 1-2 years.

Category B countries: the UK and Australia. These countries have lower capital and reporting requirements. For example, the minimum capital in the UK is $100 thousand, and the procedure for obtaining a license will take about a year and will cost $ 22-50 thousand.

Category C countries: Cyprus, New Zealand and Malta. These jurisdictions combine price, quality and access to the markets of other countries (for example, the EU for Cyprus and Malta according to the MiFID Directive). For example, the minimum authorized capital for a broker-agent in Cyprus is EUR 125 thousand.

Category D countries: Belize, British Virgin Islands, Cayman Islands, Vanuatu, they are the least demanding in terms of share capital and previous experience of carrying out brokerage activities.

Jurisdictions C and D are the most popular with forex brokers due to the fast and cheap procedure for obtaining a forex license.

The best choice for a forex broker who is starting out in this market is Vanuatu. From the moment of receiving all the necessary documents, the process of obtaining a Forex license takes only 2-3 months. The minimum share capital is 50 thousand USD.

How to get a Forex license?

We have compiled the basic checklist for obtaining a forex license in any jurisdiction:

  • Register a company;
  • Prepare corporate documents;
  • Pay state fees;
  • Prepare a business plan, description of AML / KYC procedures and other documents;
  • Fill in and submit an application for a Forex license to the relevant government agency;
  • Open a corporate bank account;
  • Connect a merchant account for processing bank cards.

Requirements for the required documents vary by jurisdiction, but in general most documents will be identical.

Obtaining a Forex license: additional requirements

Additional costs include:

  • Accounting service;
  • Virtual or physical office;
  • Salary fund for employees;
  • Opening additional bank accounts and merchant accounts;
  • Legal design of the web-site, drafting Terms of Use policies, Privacy Policy, Cookies Policy (according to the requirements of the GDPR and payment systems).

Vanuatu forex license is the best option for start-up forex broker in 2020. Contact Legarithm via chat, we will be happy to advise you and select the best solution for launching your brokerage company.