Popular demands for Forex brokerages

The Forex market is open for new brokers that provide excellent service. Statistics show that about 8 mln traders enter the FX industry every year. All of them are looking for high-end trading solutions. When it comes to trading, regulatory requirements play a vital role.

Newer traders and investors want to apply to a company that prioritizes protecting the players’ rights. Therefore, Forex prime brokers need to comply with legal norms and conditions of the financial market.

When business founders think about how to set up a Forex brokerage firm, they need to focus on choosing a reliable jurisdiction.

What is the role of the jurisdiction in the founding process?

Let’s analyze why trustworthy regulation plays such a vital role for a new broker? There are three reasons of such importance:

• Different countries set various demands towards FX brokers; this is why there’s no single algorithm for creating a Forex brokerage company.
• Financial authorities provide a specific set of requirements newcomer brokers need to follow to become registered.
• Each jurisdiction has a different tax policy.

The most popular Forex broker regulations are the UK, the USA, Cyprus, Japan, Malta, and Australia when it comes to the most frequently cited jurisdictions. Meanwhile, countries with less severe demands (for instance, Virgin Islands, Saint Vincent and the Grenadines, Belize, etc.). Remember: the stricter FX rules are, the more chances that traders will join the trading platform.

Here are the top 5 Forex jurisdictions to learn the mandatory requirements and possible expenses.

Australia

More than 40 global Forex brokers are registered there. Let’s learn conditions from the local financial authority.

1. Forex broker regulation body: Australia Securities and Investments Commission.
2. A normative act that regulates Forex brokers: Corporations Act (2001).
3. License expenses: The minimal amount is $35,000.
4. Terms of registration: from 6 to 12 months (the final term depends on each specific case).
5. Annual license fee: $1,086 per year.
6. Particular demands: Australia-based brokerage companies can operate worldwide (except the USA).
7. Taxation policy: Forex brokers pay income taxes from 25% (small/medium businesses) to 30% (large businesses). The VAT rate is 10%.

Cyprus

The Republic of Cyprus is well-known as one of the European financial centers. The local regulatory body provides convenient and brokerage-friendly requirements, while the first FX license was issued in 1998.

1. Financial authority: Cyprus Securities and Exchange Commission.
2. A normative act that regulates Forex brokers: Investment Services and Activities and Regulated Market Law (2007).
3. License expenses: from €125,000 to €730,000.
4. Terms of registration: from 2 to 3 months.
5. Annual license fee: €4,000 per year.
6. Particular demands: The minimal amount of the equity capital is €200,000.
7. Taxation policy: Forex brokerage companies pay the corporate tax of 12.5%, which is one of the lowest tax rates in the world. The value-added tax rate is 19%.

Malta

Malta is an innovation-friendly country, especially welcoming new financial companies. This jurisdiction is perfect to start a cryptocurrency business or a Forex broker.

1. Financial authority: Malta Financial Services Authority.
2. A normative act that regulates Forex brokers: National Foreign Direct Investment Act (2002).
3. License expenses: from €2,600 to €10,000 (depends on the scope of services).
4. Terms of Registration: minimum of 6 months.
5. Annual license fee: minimum of €4,000 per year + €250 for every €250,000 net income.
6. Particular demands: Malta-based brokers can operate throughout the EU. The amount of the registered capital varies from €125,000 (for a 2nd category license) to €730,000 (for a 3rd category license).
7. Taxation policy: Companies with Maltese registration pay 35% of corporate tax and 18% of the value-added tax. Meanwhile, if the Forex broker has an office in Malta, this amount will be reduced to 5%.

United Kingdom

The UK license is one the hardest to obtain due to the strict regulation. However, it attracts thousands of traders and investors. What are the local requirements?

1. Financial authority: FCA (Financial Conduct Authority).
2. A normative act that regulates Forex brokers: Financial Services Act (2012).
3. License expenses: from $22,000 to $50,000
4. Terms of registration: from 1 to 2 years.
5. Annual license fee: From £5,000 annually.
6. Particular demands: The FX broker needs to have the equity capital of £100,000 – £125,000 (for STP companies) and £730,000 – £1,000,000 (for market makers).
7. Taxation policy: Forex brokerage companies pay 19% of the income tax and 17.5% of value-added tax

United States

And the final question: how to open a Forex brokerage in the United States? This country has the most severe set of demands, but this regulation is the most attractive for traders.

1. Financial authorities: Securities and Exchange Commission and Commodities Futures Trade Commission.
2. Normative acts that regulate Forex brokers: Wall St. Reform and Protections Act (2008) and Dodd-Frank Act (2010).
3. License expenses: Maximum of $1,000,000 and $25,000 of a specific FINRA deposit.
4. Terms of Registration: From 12 to 18 months.
5. Annual license fee: Minimum of $10,000 per year.
6. Particular demands: The minimum equity capital is $250,000. There is a special requirement for a leverage level – a maximum of 1:50.
7. Taxation policy: Companies with American licenses pay 21% of the income tax.

Therefore, new brokerage companies need to check all demands and decide which offer is the best. Note that the legislature is constantly changing, so it’s better to have the upper hand on the updates.

When you don’t know how to start a Forex business, apply to a successful company. B2Broker provides a ready-made White Label FX solution. Skilled experts help with the registration and getting a license, which skyrockets your brokerage company.