While local regulators are pushing regulated brokers to their limits, offshore licensing is again a hot topic. In this article, we will discuss the best offshore jurisdictions to set up Forex brokerage in 2020
April 15 2020, | AtoZ Markets – While we as traders are used to opposing offshore forex brokers, renowned regulators are actually making it impossible for people outside the US, Australia, New Zealand, and the US to trade spot FX. As an example, in June 2019 IC Markets stopped serving its clients outside Australia.
The same action is being enforced by CySEC as well. Brokers are being forced to get a compliance opinion from every country they accept clients from otherwise face the possibility of receiving a hefty fine. As a result, brokers are facing the following two actions:
- Stop serving clients outside the EU
- Open a separate offshore branch with relaxed regulatory requirements
Best country to set up a Forex brokerage
No matter how experienced you are, there is no one country that can be defined as the best country to set up a new Forex brokerage.
Your country choice should be based on how much money you have at your disposal as a start-up capital, what type of broker (A/B book or hybrid) you want to open and about your reason for going offshore.
If you don’t necessarily need to be in an offshore environment, it is always recommended to set up your new Forex brokerage in one of the EU countries e.g. Cyprus. Although there are many corporate service providers, based on our experience Parparinos Milonas Corporate & Legal Consultants will get you the best result for your buck, both for establishing a new broker in Cyprus or an offshore brokerage in any other jurisdiction.
On the other end of the spectrum are off-shore jurisdictions, like BVI, Mauritius, Dominican Republic, etc. Establishing a brokerage firm in one of these jurisdictions is pretty straight-forward and relatively cheap too. However, you will always have problems with banks and payment processors. Therefore, you need to select your CSP strategically so that you can get your operations running without any hiccup.
Here are some of the most popular offshore jurisdictions:
- Saint Vincent and the Grenadines;
- Marshall Islands;
- British Virgin Islands;
- Cayman Islands;
- the Seychelles;
- Vanuatu (recent rising star for its cost)
The bottom line is, you need to do a proper an in-depth analysis of the jurisdiction before you decide to go ahead and set up a brokerage. Don’t be cheap, cheap is almost never the best option.
Offshore Forex Brokerage capital requirements
Alright, you are ready to move forward with your Offshore Forex Brokerage set-up. One of your biggest concerns is likely to be your capital requirements. Often capital requirements by these countries intend to make sure that founders are financially solid.
- Belize capital requirement for new Forex brokerage is USD $500,000
- Cayman Islands capital requirement for new Forex brokerage is USD $100,000
- Mauritius capital requirement for new Forex brokerage is USD $28,000 (MUR 1 000 000)
Meanwhile, a Cyprus companies with CySEC license need to have EUR 730,000. This sum will act as their startup capital. Additionally, these brokers are must maintain client funds in segregated accounts.
Cheapest Offshore country to set up a Forex Brokerage
The cheapest offshore country to set up a Forex Brokerage is Vanuatu. To set up a new brokerage in Vanuatu you will end up spending USD $2,000 as a local capital requirement and $1,000 – $3,000 to your corporate service provider
As we said, cheap is rarely a good option to set up a reliable financial service provider. So, if you end up going for this tiny Pacific Ocean island country your biggest issue will be finding a proper banking partner. Thus, make sure that your legal compliance partner is able to provide you a banking solution too.
Acquire a Cyprus Forex Broker with CIF license
Perhaps, you do not necessarily have to have an offshore company! You could consider establishing your Forex Brokerage in Cyprus.
The leading Global Marketing Service provider, 7Marketz Group can assist you to be connected with an existing Forex Brokerage which is for Sale. Buying such an entity could be cheaper from a larger perspective, since you are likely to have your Bank Accounts, MetaQuotes license as well as LPs included in the deal.
Full disclosure: AtoZMarkets.com is a 7Marketz Group company.
Risk of trading with an offshore Forex broker
If you are a trader you need to do proper research about your offshore broker. Otherwise, you run a big risk of losing your money to a possible scam. This does not mean all the offshore forex brokers are bad. Some of these brokers just chose to go for their offshore branch in order to give higher leverage or accept clients from different countries besides just Europe or Australia.
If you have ended up with a shady offshore broker the following should be your main concern:
- The broker can just disappear
- Unlicensed brokers could delete your trading account
- Your earnings could be nullified by your broker and you might lose it all
- You may lose your deposit
If you have been a victim of an offshore broker scam, you might be able to recover your deposit. MyChargeBack is an American company, registered in Delaware, with a global focus and an international client base throughout North and South America, Europe, Africa, Asia, and Oceania.