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#1 05-08-2019 22:22:17

Admin & Trader
From: Paris - France
Registered: 21-12-2009
Posts: 3068

Regulation jurisdictions for new brokers

Regulation jurisdictions for new brokers
The forex industry changed significantly in 2018, especially because of the harsh new ESMA restrictions in Europe and the application of MiFID 2 rules, not to mention the eradication of revenue sharing models with affiliates. The outcome of all this is that many brokers have sold their operations. Below is a description of the various regulatory agencies so that you know what is going on across the world.

The 5 leading jurisdiction categories for new forex brokers

Below are 5 jurisdictional areas for new forex brokers. The groups are made based on registration costs as well as the overall difficulty to create a forex brokerage:

1. The USA "FDM" license is the hardest to get, and the costliest. As of last year, only two brokerages are authorised and only 1 brokerage is currently applying for one.

2. FSA (Japan), ASIC (Australia), MAS (Singapore), FCA (United Kingdom). Japan's FSA is still pretty strict, but veteran players with lots of experience are still able to get one.

Singapore's MAS issued 7 new forex brokerage licenses last year, despite their rather elevated working capital requirements.

On the other hand, the ASIC in Australia has only issued 2 licenses in the past three years, making it another country where it's hard to set up forex trading operations.

The United Kingdom's FCA is also in this group. Here, it takes at least a year to obtain a forex brokerage licence, partly due to the fact that it's a prestigious destination for forex brokerages. The FCA's licence is also ideal as working capital minimums are lower and the compliance process is a bit easier to get through. 

3. MFSA (Malta), CYSEC (Cyprus)

MFSA (Malta) is a popular destination for fund managers (multifund accounts), however this is not so much the case for traditional brokers (only 3 brokers were based there as of this writing).

CYSEC (Cyprus): The MIFID 2 legislation and the new ESMA leverage limits are definitely hurting Cyprus-based brokerages. A few brokers there have sold their businesses due to these leverage limits and rising operating costs.

New Zealand no longer welcomes forex brokerages, but it does welcome payment processors.

4. FSA (Labuan) and VSDL (Vanuatu) - are currently the most popular and least expensive places to get a licence. However, neither of these countries is viewed favourably with respect to regulatory compliance. The FSC (BVI) should also be placed in this category, even though licenses there are three times costlier than in Vanuatu and Labuan.

South Africa's FSB should also be mentioned, since many brokerages want to expand their operations to Africa in the aftermath of declining forex volumes among Chinese traders.

5. Last on the list are offshore brokers - in St. Vincent and the Grenadines, the Marshall Islands, etc., often launched by former Introducing Brokers in order to sell services to their own network of customers. They typically encounter suspicion and doubt by market counterparties and banks. Bank accounts can be difficult to open for brokers who fall into the last 2 above groups. Forex brokerages in Labuan and Vanuatu often have to work with Southeast Asian banks and those in the last category will have to resort to working with payment providers if no local island banks will work with them.

"Anything worth having is worth going for - all the way." - J.R. Ewing



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