Brokerages throughout the world see money transfers worth trillions of dollars. On top of that, the market that moves this amount of money is pretty much free to enter for anybody out there.
While some prefer to trade Forex or any other thing, others would instead open their brokerage. Naturally, this isn’t an easy task and takes more than just a bit of business knowledge. But, if you want to become the best broker for scalping Forex or day trading, you have to put quite some time into such an endeavor.
Here’s a step-by-step guide on how to start a brokerage in 2021!
Opening the Brokerage from Scratch
Most of you reading this article probably want to start a brokerage from scratch – meaning that you might not know how to plan such a thing. Some of you could know the ins and outs of how this should go, but our recommendation is to give this piece still a read – maybe you’ve missed something!
This implies excellent knowledge of the markets that you’ll activate in. A well-done study will also show you a detailed insight into the taxes that you have to pay, the taxation process, or anything else that must be considered when starting a brokerage.
Obviously, any business needs a comprehensive plan to run properly. You can’t make decisions on the fly – never!
In terms of registration, you’ll first answer a couple of questions for yourself. Before the actual registration process, figure where you want to open your brokerage, what costs it implies, and if there’s anything else that you might have left out of your plan.
4. Target Audience Research
When it comes to brokerages, your goal is to find the most profitable customer possible. Naturally, this calls for even more research. Ask yourself why a customer would use your business, what it offers above other brokerages, who your main competitors and demographics are, and what interests your audience has. Knowing these will let you create a personalized marketing plan designed for success.
5. Target Market Research
For this particular aspect, you need to closely analyze more than just enough data. The ideal audience is nothing without the proper target market. For example, you will most likely set up a Forex business, as it is the most profitable at the moment. However, you wouldn’t want to skip trading options such as stocks or the (in)famous crypto. Depending on your audience, one of the three will be your main focus.
6. Brokerage Location
This is important because taxes depend on it, so to say. Here, offshore is the common option, thanks to its benefits. Namely, you can enjoy operating your brokerage in a tax haven that, on top of that, features no leverage restrictions and comes with a simple license approval process, simple requirements in terms of capital, and low operation costs, to name a few.
7. Capital Management
Just like with any other business, you must know how to manage your capital the right way. If you don’t do this, your business might go under long before it’s actually opened. For this, take into account the characteristics of establishing a fully-fledged company, including the perfect business plan for it. In the end, you can choose to base your business on a market maker plan or on an STP, hybrid, or ECN model. Research is paramount here! Capital management also implies exceptional data transparency and the safety of funds (both yours and your clients’).
Brokerages rely on technology, as most of their actions are performed online. While for starters, you’ll need things like good web designers and developers, once you get deeper into your plan, you’ll have to look into CRM solutions, as well as into some state-of-the-art trading platforms! There are many platforms out there, but you’ll likely choose one based on its popularity on the market. Don’t try to be unique by choosing an obscure forum, as traders prefer using the same platform every day to get accustomed to new ones when changing brokers.
9. Liquidity Provider
Such a provider is essential to any business of this kind, as it keeps the market always available for traders. Such providers are securities’ middlemen. Thanks to them, sellers and buyers have constant and easy access to what they trade.
10. Payment Processor
There’s not much to say about this; you need a trusted and reputable processor as this is one of the first things that your potential clients interact with. If you lose their trust from the time of their first deposit, your business will go down soon.
11. Setting Up the Operations
After taking care of the steps mentioned above, you will slowly begin to prepare the operations of your business. This implies establishing an office, entrusting a part of your tasks to a professional team of employees, and preparing your business for its pre-launch stage. The latter will guarantee that everything is ready to storm the internet!
Then, in the end, you will hit the live button and officially introduce your business to the internet – and vice versa. From this moment, everything that matters is growing your brokerage’s online presence and making sure that every step of the above is closely followed, analyzed, and fine-tuned, if necessary.
The Bottom Line
These eleven steps can take more than enough to accomplish, depending on how much you want to embark on this kind of trip, so to say. The markets that such businesses operate in are far from simple and come with a varied target audience.
In our opinion, one of the most important things to take into account when it comes to creating a brokerage is the power of research. Given how the pandemic changed the world’s view over trading overall, it is essential to know everything about everything!
The environment that once included mainly people over 30 or with a business background is now populated by the new generation!