Forex broker: from registration to an aggregator
When opening forex broker there are many problems, without solving which you could waste time and money (a lot of it). One of the most important aspects of setting up 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
At forex market there are two types of companies that provide the work of traders - brokers and dealers. The dealer functions according to the Dealing Desk (DD) principle, where all operations are performed within the company. The dealer provides the trader with the trading software and supplies him with the quotations of assets, which he can get even from open sources (forex robots). The dealer fulfills the terms of the transaction opened by the trader on the trading floor, and in this case the dealer is actually the counterparty - buys from the trader or sells to the trader (forex trading in 2020). A dealer also facilitates transactions between buyers and sellers of currency, earning on the difference between the prices of the bid (buyer) and the ask (ask) (forex trading strategies).
Usually there are equal numbers of buyers and sellers of one currency pair, but if 75% sellers place orders at a certain price at which 25% buyers are ready to close it, then the dealer closes the deals of 50% traders with his own funds. The market can turn in such a way that it will bring either a loss or profit to the dealer. But the dealer sees all transactions and objectively has the opportunity to interfere in the market situation.
Forex brokers work on No Dealing Desk (NDD) principle, i.e. they act only as intermediaries between sellers and buyers. The broker's job is to forward orders to buy or sell currencies from their trading clients through the prime broker to the liquidity providers. The prime brokers and liquidity providers may be banks, hedge funds and other large financial institutions. The broker also provides software that selects the best price offer for the trader.
The broker (Fig. 1) receives the reward for the transaction between traders, and he will not incur any losses, no matter what the result of the transaction is (Forex without investment and risk). Its intermediary functions do not allow you to interfere 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 who would like to start a profitable online business (How to start forex trading). There are practically no easy tasks when setting up such a company. Even just making the decision to brokerage already requires serious work. First of all, you need to understand forex trading and the forex industry practically at an expert level. It is not only about the skill of trading, but also about the fact that one must have considerable initial capital and possibilities of attracting investments. You will have to work out the legal aspects of the business and the technical aspects of the service, and organise work with clients. And do not count on a quick profit. In developing a plan to create a brokerage company, you will need to solve the following problems:
- Register a company - taking into account the requirements necessary for this sphere of activity;
- Get a license to work in the Forex market;
- Study and implement anti-money laundering procedures - this will be the responsibility of controlling organizations;
- Study and implement customer identification and verification procedures;
- Conduct a full audit and professional due diligence of the project;
- Open a checking account;
- Open an office, organize the hiring of staff;
- Install payment systems to support client transactions.
Forex refers to the financial sector, so absolutely every action to create a forex broker will require money and a lot of it (forex trading). Even at the planning stage it is necessary to look for sources of long-term financing, to work out the conditions for attracting investors. It will be difficult to do because the forex market is quite developed, there are many brokers and other companies in the industry. The investment in the formation of a brokerage business in any case will be large, but if the initiator of the business is trying to save money, in the end loses the investment and development prospects.
When planning one should proceed from the principle of long-term prospects, so from the very beginning one must control one's actions, avoid violating the law (which can be very harsh for forex companies) even accidentally. It is necessary to be attentive to the investors' opinion, to react adequately to the clients' suggestions and claims. If in the beginning the broker receives a lot of bad reviews and complaints, it can lead to the winding up of the business and big losses.
Peculiarities of forex brokers registration
Важный аспект создания форекс-брокера – это выбор регистрации, так как придётся делать выбор между регистрацией в признанном форекс-центре или в оффшоре. В первом случае брокер получает лицензию, к которой у инвесторов и клиентов больше доверия изначально. Брокер, зарегистрированный в США, Великобритании, Малайзии, Белизе (рис. 2), Гонконге, Сингапуре, Японии может без затруднений работать по всему миру, рассчитывать на благоприятные условия работы с банками, платить адекватные налоги и так далее. Но лицензирование на таком уровне занимает много времени и требует больших финансовых затрат.
An alternative option is to register offshore, which is faster and cheaper. This can be done in such jurisdictions as the British Virgin Islands. St. Vincent and the Grenadines, Seychelles, Cayman Islands, Vanuatu, Panama. However, there is less confidence in brokers with offshore registration and banks and other serious financial institutions avoid cooperating with such companies. Many countries have also passed laws aimed at combating offshore companies, and no one has any desire to clash with the authorities over a forex broker with unknown owners.
Payment systems for forex brokers
Without the connection of reliable payment systems, forex broker's activity is impossible. There are three main tasks to be solved when integrating payment systems:
- Obtain a Forex license, as the key payment systems work only with licensed brokers;
- Prepare all the necessary documentation for the payment operator and ensure technical integration with the traders' offices;
- Resolve the issue of commissions, as systems can charge commissions for a broker based on its parameters and reputation.
It is necessary to connect all kinds of processing, from bank cards to electronic payments, including cryptocurrencies. The more ways to deposit and withdraw money, the more you can attract clients. Crediting the balance is the most important moment, it should not cause any difficulties to allow the trader to join the trading process as quickly as possible.
The broker can arrange the crediting in automatic or manual mode. In the latter mode, the client is informed about the details for crediting and as soon as the funds arrive at the address, the broker manually increases the client's account balance. In automatic mode crediting is faster, the client simply enters details in the form, agrees to transfer funds and the transfer goes to the trading account. At the initial stage of forex broker business development the "basic", i.e. all known payment systems are connected - Visa, MasterCard, Qiwi, WebMoney, Yandex Money.
Visa is a global payment giant. The need for VIsa card processing is due to the fact that there is hardly a trader in any country of the world who does not have a VIsa card. The advantage of Visa is that its scale allows it to offer conditions from which a trader and a broker can choose the most suitable ones. But to work with VIsa, you need to be licensed and not offshore. As in 2018 unregulated and unlicensed brokers were classified by this system as organizers of gambling.
MasterCard has also tightened requirements for unregulated brokers, categorizing them as gambling providers. But MasterCard's format cards, VIsa's main competitor, are also required to be connected to a licensed forex broker.
Yandex Money (Yandex.Money) is a popular Russian payment system, the third largest in Russia after Sberbank.Online and plastic banking debit и credit cards. This is a fairly easy payment service, offers great service functionality, provides great payment speed. But it does not work flawlessly, steadily has a lot of negative feedback, there are claims to the support service and so on.
Qiwi is also quite popular among Russian traders and has an extensive network of ATMs. It is notable for its ease of use, but clients often complain about high transaction fees and vaguely justified blocking of wallets.
WebMoney is the oldest Russian payment service. Many traders use it. The system is reliable enough, but the commissions are high, the service is cumbersome, the company is a little behind the pace of time. But it needs to be connected, because over the years of existence WebMoney wallet have almost half of Runet and many users abroad.
The World - is a Russian ruble payment system, occupies about 17% of the Russian payments market volume, so it may be relevant to Russian traders. It has a very limited circulation abroad.
Paypal - is one of the world's largest electronic payment systems, used to deposit and withdraw funds using MasterCard and VIsa bank cards. Many brokers are connected to the system. But the Internet is full of reviews about Paypal as a system that cares too much about the security of transactions, which makes it difficult to work with it. Nevertheless, the system has many users.
Payoneer (https://www.payoneer.com) is also quite a popular payment service, which is connected for users who make transactions with MasterCard.
Advcash (Fig. 3) is a well-known payment platform, with which you can fund your account via bank cards, cryptocurrencies, bank transfers, etc. The system is growing in popularity, but, on the other hand, customers are already noticing an ever-tightening verification policy.
Perfect Money is also quite actively used by forex traders, the popularity is growing, but so far there are many negative reviews related to the blocking of wallets and other problems in the service.
A payment aggregator is a service that consolidates several payment systems for conducting transactions with forex brokers. In this case, the broker enters into an agreement with the payment aggregator, selects a suitable tariff. Then a single software gateway is organized, through which transactions of all possible payment systems are conducted.
For example, one of the popular aggregators, Interkassa (https://www.interkassa.com/) (Fig. 4) is a Ukrainian multi-currency system that combines Visa/MasterCard/Mir, Yandex.Money, Qiwi, WebMoney, AdvCash, PerfectMoney, Exmo, Wallet one, NixMoney. The aggregator offers automated payments, a fairly high degree of protection.
Win Pay (https://win-pay.ru) is another well-known aggregator working with VISA, MasterCard, Maestro, Yandex.Money and QIWI. Like the previous service, it is actively used by large forex companies and provides brokers with a significant choice of service conditions. Objectively, connecting and supporting forex broker payment systems is organizationally and technically difficult. But how to do it quickly and without mistakes?
Processing company: Problem and solution
In order to properly set up a payment system, forex brokers turn to a company that will select and connect the means to ensure payments. The importance of an accurately configured and smoothly operating payment system for a forex broker cannot be overestimated. That's why there is a huge demand for the services of such companies in the forex industry. And, accordingly, in this area there are a lot of fraudsters, who can easily deceive the broker, especially in some technical points. In such a difficult business as Forex brokerage this will lead to serious problems already at the initial stage and it will be difficult to sort them out later. In order not to err in choosing, you must carefully study the potential partner. The signs of a bona fide company include the following:
- The cost of connecting an aggregator (free of charge is best);
- The ability to withdraw funds to accounts (plus, if withdrawal is possible abroad);
- Ability to connect a large number of payment systems, including cryptocurrency;
- Multicurrency balance with the possibility of conversion;
- Ability to accept transfers from individuals, including large sums;
- Reasonable rates;
- The possibility of a free test connection.
- Additional features, such as one-click payment, enhanced security measures, and so on.
Searching for such a company can take a long time, it's a whole job of sifting out obvious crooks, choosing the best option out of bona fide companies on many parameters - all this takes a lot of time and money, which should be working on the development of business. And here, too, mistakes are possible, because not all companies are willing to work to create the conditions that a particular broker needs. That's why you can cut costs and write to us at [email protected] , then we can offer you a processing company, which will connect payment systems on optimal conditions, taking into account individual requirements of the client.