While performing research on trends in the online forex & CFD trading industry, we noticed that many have queried Google to determine whether there is an incentive to be an unlicensed forex broker. From our perspective, the answer is yes.
In today’s post, we’ll explore some of the incentives to initially start a forex broker without regulation. To get started, let’s consider the costs involved in obtaining a forex broker license.
#1. Cost Savings – One Incentive to be an Unlicensed Forex Broker
A major advantage in launching an unlicensed forex broker is the ability to save money during the early growth stages of the business. Obtaining regulation is expensive because nearly all regulated jurisdictions require a local office, staff, and reporting. Adding paid up capital into the equation, it shouldn’t be a surprise that regulation involves a significant commitment of capital.
We don’t encourage brokers to remain unregulated forever. Instead, we find the beginning stages of a broker’s launch to be incredibly important. In these early stages revenue is minimal which means that all expenses need to be carefully managed. From our perspective, a new forex broker should wait to see some positive revenue before jumping into licensing.
#2. Time Savings – Another Incentive to Launch an Unregulated Brokerage
Not only is regulation costly, it also requires a significant commitment of time. On average it takes roughly 7 – 9 months to obtain a forex broker license and in extreme cases such as licensing in Europe, could be well over a year before the license is issued.
A broker that opts to wait for regulation before going to market could lose out on almost a year of market activity. We once again emphasize that operating unregulated on a long term basis is not wise, however, does make sense in the beginning stages. In this case, launching a forex broker without regulation allows the new business to immediately take advantage of existing market opportunities.
#3. Test Out the Business Viability
An unregulated forex broker has the advantage that it can more easily focus on revenue generation. After all, if the business doesn’t work out in the end, did regulation make a difference?
Almost all of the major forex brokerages that exist in the marketplace today started off their journey as unregulated. The reason is that it makes more sense to test out the viability of the business model before committing more funds to regulation. From our perspective revenue from positive growth should be allocated to licensing, rather than being licensed from day one.
An unlicensed forex broker does not have to worry about the costs or work involved in maintaining a forex broker license. Nor does an unregulated forex broker have to dedicate the time to obtain a forex broker license or put up the necessary capital and other costs. It’s very cost effective and easy to operate unregulated.
Forex Consulting – Guidance in Launching a Forex Broker
Our team has the tools, knowledge, and market know-how to help you start a forex broker from A to Z. We provide the technology, liquidity, and banking services needed to start efficiently and quickly.
To learn more about launching a broker, don’t hesitate to contact us today!
