The first thing to know about the cost of starting a forex broker is that it is significant, but the total amount of money involved in setting up such a business often exceeds expectations. Brokers represent a huge potential and can allow their owners to generate significant revenues, however being an independent broker often requires a lot of capital since a broker market maker must be able to offset the amount of money invested by his traders and play a counterpart role, the budget to create this kind of broker can represent millions of dollars or even more.
Becoming a subsidiary of an existing forex broker or a white label of an existing forex broker will not require tens of millions of dollars of capital because here there is no need to set up your own broker from scratch. By being a subsidiary or white label, we essentially play the role of an « introducing broker » IB, our role is therefore to be an intermediary between traders and the broker to which the website and the trading platform we have belongs. Becoming an IB often requires very little expense since the agreement between the broker at the head of the business and its white label will usually be a profit-sharing agreement. Roughly speaking one can say that the only cost to start as a forex broker’s white label will be one (or more) employee who will take care of customer support, a computer, an internet connection and a phone line.
A broker who wants to start as a no dealing desk broker could very well do so with $100,000 and maybe even less. A no dealing desk broker needs to sign partnerships with liquidity providers, so he will share with them the income he generates through the spreads of his traders.
Another solution is possible for someone who wants to get into the broker business, it is simply to buy one! However, buying a broker already established in the market is relatively expensive, the price range is wide and can vary from $10,000,000 to $1,000,000,000 or more depending on the broker.
As you will have understood, starting your own forex broker does not necessarily require astronomical amounts of money. Associates with tens of thousands of Euros in capital may very well launch their own website, rent a trading platform and pay one or more employees to run the machine.
As a forex trader this is how you have to be wary of new brokers or brokers unknown to the battalion. Strong forex brokers such as eToro, FXCM, FxPro or Plus500 weigh hundreds of millions of Euros (see more) and are sometimes listed on the stock exchange (the case of FXCM and Plus500). These brokers comply with French and European financial laws, particularly with regard to the security of traders’ funds, and thus have segregated bank accounts on which clients’ capital is deposited. In addition, these large brokers, leaders in the trading industry, have various licenses and one of the criteria required to obtain one of these licenses is to have a high level of equity capital (sometimes several million euros). So don’t take unnecessary risks if you start trading forex, it is possible to avoid investment scams by using a regulated forex broker to intervene in the financial markets and benefit from the Forexagone Guarantee.