Forex broker: from registration to aggregator
When opening a forex broker there are many problems, without solving which you can waste time and money (large). One of the most important aspects when creating a brokerage company is the selection and implementation of profitable reliable payment solutions. How to do it? Who to turn to?
Who are dealers and brokers
There are two types of companies on the Forex market that provide the work of traders - brokers and dealers. The dealer operates on the principle of Dealing Desk (DD), in which all operations are carried out within the company. The dealer provides the trader with trading software and supplies asset quotes, which can be obtained even from open sources (forex robots). The dealer fulfills the terms and conditions of the transaction, which was opened by the trader on the trading platform, and in this case the dealer is actually a counterparty - he buys from the trader or sells to the trader (forex trading in 2020). The dealer also provides transactions between buyers and sellers of currency, earning on the difference between the prices of the bid (buyer) and the seller (seller) (forex trading strategies).
Usually, the number of sellers and buyers of one currency pair is equal, but if 75% of sellers place orders at a certain value, at which 25% of buyers are ready to close it, the dealer closes the deals of 50% of traders with his own funds. The market can turn around in such a way that it will bring either loss or profit to the dealer. But the dealer sees all deals and objectively has an opportunity to intervene in the market situation.
Forex brokers work on the principle of No Dealing Desk (NDD), that is, they act only as intermediaries between sellers and buyers. The broker's task is to redirect orders to buy or sell currency from its clients-traders through a prime broker to liquidity providers. Banks, hedge funds and other large financial institutions can act as prime brokers and liquidity providers. The broker also provides software that selects the best price offer for the trader.
A broker (pic. 1) receives a reward for a trade between traders, and he will not incur losses, no matter what the result of the trade is (forex without investment and risk). Its intermediary functions do not allow interfering in the market situation. Also, without the need to close transactions in favor of certain traders, the organization of brokerage business requires less financial expenses.
How to Become a Broker
The idea of becoming a forex broker attracts many people who would like to start a profitable business on the Internet (how to start trading on Forex). When creating such a company, there are almost no easy tasks. Even just making a decision about brokerage already requires serious work. First of all, you need to understand forex trading and the forex industry practically at the expert level. It's not only about the ability to trade, but also about the fact that you need to have a significant initial capital and opportunities to attract investment. We will have to work out the legal aspects of activities, technical issues of service, and organize work with clients. And do not count on a quick profit. When developing a plan to create a brokerage company, you will need to solve the following problems:
To register a company - taking into account the requirements necessary for this area of activity;
Get licenses to work in the forex market;
Study and implement anti-money laundering procedures - this will be imposed on control organizations;
To study and implement customer identification and verification procedures;
To conduct a full audit and professional legal due diligence of the project;
Open a current account;
Open an office, organize recruitment;
Install payment systems to secure client transactions.
Forex refers to the financial sphere, so absolutely every action to create a forex broker will require money and a lot of money (trading on forex). Even at the planning stage it is necessary to look for sources of long-term financing, to work out the conditions of attracting investors. This will be difficult to do, as the forex market is quite developed, brokers and other companies in the industry a lot. Investments in the formation of brokerage business in any case will be great, but if the initiator of the business is trying to save money, it will eventually lose both investment and development prospects.
Planning should be based on the principle of long-term prospects, so from the very beginning you need to control your actions, avoid breaking the law (which can be very harsh to forex companies), even by accident. It is necessary to pay attention to the opinion of investors, to react adequately to offers and claims of clients. If a broker gets a lot of bad feedback and complaints at the beginning of his work, it can lead to business winding down and large losses.