Becoming a white label Forex provider is a practical first step into the financial services industry. It’s easy to set up a white label platform so your Forex business can be up and running relatively quickly. But to take your business to the next level, you really should consider becoming a Forex broker. In this article, we’re going to take a closer look at some of the reasons making the move to the broker business model makes such good business sense.
First things first though, you’ll need to make sure you’re fully licensed to act as a Forex broker in the UK. To do this, you will need to register with regulator. For european markets there are many options including FCA and CySec.
Registration involves completing an application pack which requires both financial and nonfinancial information about your firm and the people running it. You will also need to submit an authorisation fee that ranges between £1,500 and £2,500.
Brokers has more control
The biggest difference between a white label provider and a broker is the level of control that each has over their Forex business. As a white label provider, updates and changes to your platform are restricted by your broker partner. This can be extremely frustrating when your clients are crying out for a new feature but you’re not in a position to add it. Brokers, however, have complete freedom when it comes to running their business. They retain full control over their platform and can make any changes they deem necessary.
While the setup involved in a white label platform is minimal, the appearance is often generic with very little scope for customisation. White label providers do not have a choice of liquidity provider and can only offer clients a limited number of instruments. Running your own B Book is usually out of the question.
A broker, on the other hand, can have a fully branded trading platform set up within a matter of days. Brokers can offer their clients a full range of financial instruments including Forex, CFDs, commodities, equities and indices. Brokers can also choose from a selection of liquidity providers and have full control over which risk strategy they employ (A, B or Smart B Book model).
If there is one argument that particularly favours the broker business model, it is the amount of money that a Forex business can generate from trading activities. The average white label provider loses as much as 50% of their profits to their broker partner whereas a broker gets to keep 100% of their profits. 50% is a significant chunk of profits to lose so becoming a broker should be a serious consideration for any white label provider looking to boost their profits.
Sales and marketing
White label providers have to work extremely hard to attract clients. You have to drive traffic to your trading platform, convert this traffic into clients and then try to generate as much income as possible from these clients. Brokers have to work equally as hard at each of these steps. However, as mentioned above, brokers retain greater profits than white label providers so their return on investment from sales and marketing activities is much greater.
White label providers have very little control over the trading conditions that govern a client’s trading experience. Your broker partner dictates what fees you have to charge and the type and variety of platform features you can offer your clients.
Brokers have full control over their platform’s trading conditions. They decide on the spreads or the leverage options and can offer their clients a wide range of platform features. This happens to be one of the key selling points of our xStation trading platform. xStation is built on open source technology so third party developers are actively encouraged to develop new trading apps.
As a white label provider, the opportunities for future growth are limited at best. Upgrading or improving any aspect of your Forex business is subject to your broker partner’s capabilities and ambition.
For a broker though, the opportunities are limitless. There are no such barriers to the growth of their Forex business. What’s more, brokers can expand and generate additional income by setting up their own white label partners.
If you are a white label provider, hopefully this article will help explain how becoming a broker can have such a positive impact on your Forex business. To find out more about the advantages of being a broker, get in touch with one of our advisers.