Best jurisdictions for obtaining a Forex brokerage license in 2021
If you are considering starting your own Forex brokerage, obtaining a Forex license is one of the first things you should consider in order to legitimize your business.
In this article, we will consider the advantages of the following jurisdictions for obtaining a Forex brokerage license in 2021: Cyprus, The United Kingdom, Vanuatu and Malta.
Cyprus
Cyprus is a working solution and is considered a prestigious jurisdiction for Forex business that has a longstanding practice of issuing investment and brokerage licenses. Being a member of the EU, Cyprus is in full compliance with the EU Markets in Financial Instruments Directive. Upon receiving authorization in Cyprus Securities and Exchange Commission, the company can operate in all other EU countries, as well as in Iceland, Norway and Liechtenstein. (certification of brokerage license in Eurozone is regulated by MiFID).
The main requirements:
– developed organizational structure of the company, AML and KYC policies and business plan;
– settled bank account at a local bank;
– delivery of capital adequacy reports, annual internal and external financial audits, annual reports on compliance CIF to the CySEC requirements, reports on risk management, financial reports;
– personnel requirements (minimum required number of managers and employees, their qualifications, professional experience and good reputation, etc. );
– local office.
Depending on the type and quantity of services, the company’s minimum authorized capital should not be less than:
EUR 80,000 (receiving and transmitting of trading directives of clients, investment advising);
EUR 125,000 (receiving and transmitting of trading directives of clients, investment advising, performing trading directives of clients, management of the clients investment portfolio, Straight-Through-Processing (STP) license);
EUR 730,000 (implementation of trade operations on the stock exchange, market maker).
Approximate timelines: from 6 to 14 months.
Malta
Obtaining a brokerage license in Malta allows its recipient to work throughout Europe according to the EU certification Directive.
In order to obtain a brokerage license in Malta, a company should have a paid authorized capital (must be formed in a local bank before obtaining a license), a physical office in Malta and a qualified staff. The licensed company is required to deliver regular financial reports.
Depending on the type of the license, the minimum share capital of the company shall be at least:
Category 2 license – EUR 125, 000 – STP, (brokers send orders directly from their clients to liquidity providers that are international banks with open access to the real market traders, as well as for market prices).
Category 3 license – EUR 730,000 – Market maker, the broker has the right to set prices, manage clients’ funds at his discretion, work directly (dealing on his own account).
Approximate timelines: from 5 to 7 months.
The United Kingdom
An FCA broker license in the United Kingdom is one of the most prestigious in the world.
The company must have a physical office with local directors in the United Kingdom, who have strong background in finance and investment;
There are three categories relevant to forex broker services in the UK:
Dealer License – a full license equivalent to “market making”
Intermediary License – a “Matched Principle” license limiting a broker’s activities to STP of orders in the case of an Agency or A-Book model;
Restricted Broker License – an introducer-type of license allowing sales and marketing but not authorized to hold client funds.
A Dealer or Intermediary license allow offering Contracts for Difference (CFDs) in forex, commodities, futures and shares to retail and wholesale clients. Whereas, a Restricted license allows introducing clients to a Dealer or Intermediary firm.
Initial capital requirements:
Dealer license – EUR 730,000
Intermediary License – EUR 125,000
Restricted Broker license – EUR 50,000.
Approximate timelines: 12 months.
Vanuatu
In comparison with the abovementioned jurisdictions, in terms of costs a cheaper option for Forex license obtaining would be Vanuatu. Besides, Vanuatu has more lenient forex rules and regulation.
The Vanuatu Dealers in Securities License allows for both market making and STP (A-book) business models.
Other benefits are absence of residency requirements for directors and shareholders, shorter terms of approval from the Regulator, no requirements on substance like local physical office (though it may soon become a requirement) and employees.
One of the requirements for the licensed company is a Security Deposit of USD 50,000.
The disadvantages of this jurisdiction is that it is an offshore which makes setting up of a bank account more complicated (basically the options are limited by local banks).
Approximate timelines: from 3 to 5 months.
Other appropriate jurisdictions for obtaining Forex brokerage license: the USA, Australia and New Zealand.
Mayon Solutions provides a wide range of services on supervision of your business establishment and maintenance. We have a considerable expertise in creating of a strong foundation for a successful and long-term business solution considering the particulars of client’s business model, based on a clear legal structure combined with strong financial planning.
We can arrange the whole process from A to Z, including, inter alia, incorporations, opening of bank accounts, tax planning, accounting and reporting, obtaining licenses for your business, if required.
We are developing new and the most up-to date solutions that our clients can use to maximize their business performance.
Shall you have any questions, please do not hesitate to contact us by e-mail: info@mayon.solutions.