Various Kinds of Jurisdictions for regulating a Forex Brokerage

The business in FX market is growing with a pace as number of FX players is entering this business actively. But beyond establishing and marketing your business, suitable jurisdiction should be chosen, which will be dependent upon number of parameters like regulatory procedures, international, community and domestic provisions.  Before getting a license from a specific jurisdiction, following things should be kept in mind:

  • The business model- STP, Money Manager, DD etc. opted by the broker.
  • The method of the launch of the company
  • The importance of the licences to the existing clients and prospects.
  • The bank where the corporate account of the broker is held.
  • Availability of liquid assets with the company.
  • The geographic region where the company will the company will place itself.

When you have figured out the above mentioned points, then you can go for choosing your preferred licensing agencies. These regulators intend to protect the investors from any fraudulent activity. Here are different levels of jurisdictions from starting which are categorised as under:

Level 1: includes stringent regulators like NFA, CFTC of USA and FSA of Japan.

  • To obtain license from such companies $20 million is required as free capital.
  • Rigorous reporting system is required to be fulfilled
  • The regional physical presence of your brokerage firm in these countries is compulsory.
  • Membership fee is also charged compulsorily.

Level 2: includes regulators like FCA from Great Britain and ASIC from Australia.

  • The requirements are less stringent than the level 1 regulator.
  • Local presence of your company is required with the free capital of around $100,000.
  • The licensing process takes 6 months and more with the average cost of $35,000-$50,000.
  • If the broker is not forwarding its deals to the third party, the free capital required will be more than $1, ooo, ooo while STP model will require only $100,000.

Level 3: includes regulators like CySec in Cyprus,  FSP in New Zealand and MFSA in Malta.

Regional office is required.

  • The initial capital required is $30,000.
  • The time taken in getting a licensing will be more than 6 months.
  • For legal services, the cost is approximated to be $35,000 which is for the period of 6 months.

 

Level 4: includes BIFSC in Belize

  • Initial capital required is USD100, 000.
  • The licensing can be obtained here in the average time of 40 days.
  • The fees charged for licensing is also reasonable which is USD500.
  • For the companies who have the physical presence in Belize, are granted the exemption from paying any corporate taxes within this country.

Level 5: includes all the areas ‘offshore’ where the Forex license is not essential or compulsory. Some thousand dollars needed and you are ready to start an FX business.

Level 6: This level is different from all the levels mentioned above. Here we include the countries like Latvia.

  • The registration process is simple and takes aprrox 2-3 months.
  • Being a part of European Union, the legal system is likely to be organized.
  • If you are targeting a European nation and is a beginner then registration in Latvia is easy.

Leave A Comment