In this post, we will be discussing about two very important models related to forex trading business that are catching up very fast. These are the Introducing Broker and White Label forex trading business. An Introducing Broker is an individual or a company that enters into a simple partnership with a primary forex broker. The Introducing Broker solicits clients for the primary forex broker to earn a commission. A White Label is also a type of partnership between individuals or companies that want to provide forex broking services by creating their own brand. The White Label program best suits qualified and experienced individuals or companies.
Introducing Broker Forex Business
An Introducing Broker solicits and accepts orders from customers, but does not accept money, property or securities from them. The Introducing Broker has to register with the Commodity Futures Trading Commission and carry all of the business accounts on a fully disclosed basis through a futures commission merchant.
Clients can be referred to the Primary Broker in many different ways. however, the key aspect of succeeding as a Introducing Broker is to have the means, contacts and influence on the trading population. Typically, some of the successful Introducing Brokers are:
- Investment companies and brokerage firms that have a large client base
- Successful individual traders, investment advisers and money managers
- Owners of financial websites, signal services, trading rooms, forums and discussion boards that have high visitor traffic
- Individuals/companies that want to start/own Forex business and are ready to put in hard work and achieve goals
The procedure to be followed to become an Introducing Broker is very simple, provided the conditions stipulated by the Primary Broker are complied with. An application provided by the Primary Broker has to be filled in to receive the unique ID, reference links and promotional material. The Introducing Broker can then start soliciting clients.
How Does an Introducing Broker Forex Business Work ?
A client would register a trading account with the Primary Broker either through a referral link containing the ID of the Introducing Broker or by mentioning the name of the Introducing Broker at the time of opening an account. In both the cases, the Introducing Broker receives a commission.
Two types of commission structures that are available to Introducing Brokers are as follows:
⦁ A flat fee for each of the referred client. The fee may vary from $50 to as much as $400 depending on the type of account the referred client opens with the Primary Broker.
⦁ A share of the spread so that the Introducing Broker continues to earns a small part of the spread so long as the referred client keeps trading with the Primary Broker.
Best Recommended Introducing Broker (IB) Forex Program
White Label Forex Business
A White Label forex business refers to leasing the right for placing the name of the lessee on the trading platform created by another company and marketing the same as its own. It also involves passing the trades to the lessor. Typically, the customers of the lessee may not have any kind of contractual relationship with the owner and operator of the trading platform in the case of a White Label forex business partnership. Further, the lessee is the counterparty to the trades of customers for regulatory purposes. However, the corresponding transactions that the lessee has with the lessor are considered as transactions to hedge the obligations of the lessee to the customers.
The benefits offered by a White Label Forex Brokerage Business are as Follows:
⦁ Helps to start an online forex business fast with the Primary Broker’s continuous and extensive support
⦁ Helps to avoid the costs associated with setting up and operating a dealing business model, which calls for obtaining required licenses, gaining experience in running a business and preparing to operate a forex brokerage business independently
⦁ Helpful in working with lessee’s own clients (no need to refer them to any other company) and experiencing a better control over lessee’s own business to a greater extent
How Does a White Label Forex Business Work
The operation of a White Label forex brokerage business is similar to that of running a regular forex brokerage business. It is essential to have a website that offers a fully functional online forex trading platform. Additionally, the business should set its own dealing spreads and commissions for its clients, enable opening of trading accounts, accept deposits and enable withdrawals a monitor reports (applicable for fully White Label business) or entrust account management functions, including deposits and withdrawals, with the Prime Broker (applicable for limited White Label business).
The Primary Broker would help the White Label business partner with everything required for setting up the forex brokerage business, even create a new website if necessary. Additionally, the Primary Broker would allow the White Label business partner to brand the trading platform with partner’s company name and logo, ensuring protection of the privacy of the partner such that clients don’t even get to know as to who really owns the trading platform.
However, a White Label forex brokerage cannot exercise control over following aspects:
⦁ Currency symbols that are made available for trading
⦁ The opening as well as closing of the trading hours
⦁ Aspects related to system security as it is under the control of the Primary Broker
⦁ All of the end-of-day reports and administrative activities related to trading because the extensive back-office support is handled by the Primary Broker
A White Label forex business owner earns an income from each of the trades placed by their client. Therefore, the business revenues are dependent on the clients’ trading volume. The revenue and compensation terms are often flexible and the Primary Broker provides a number of different options for the White Label business partner to choose from. The chosen option would then be incorporated in the partnership agreement executed by the parties.
If you are planning to start your own forex business, you must assess your expertise in the field and choose either an Introducing Broker or a White Label forex brokerage business. Irrespective of the business model you choose, you should be prepared to do a thorough investigation and put in hard work in order to become successful in your endeavor.