Starting off as a Forex Introducing Broker can evoke mixed feelings. One that is both exciting and intimidating at the same time. In the forex sector, graduating as a Forex IB could perhaps be considered as an achievement in itself. You are no longer playing with the small fish but instead moved on to a different playing field. Forex introducing broker business is definitely not for the faint of heart and if you do not have any prior experience in forex, then its best left alone. Unless you have been actively involved in forex, whether as a trader or money manager or a forex affiliate, chances are that it would become quite an uphill task to build up a solid business on the forex IB concept.
In this article, we focus on one important aspect that comes to anyone who is starting out as a Forex IB.
Forex IB business – Setting yourself up as a company or a business
To begin with, anyone can apply to become a Forex IB. Whether your IB application is chosen or not is very subjective and can differ from one broker to another. A word of caution though, as some forex brokers tend to pass off their affiliate program as a forex IB.
There are some clear distinctions between a forex affiliate and a forex introducing broker. Read this article to check if you qualify to become a forex introducing broker.
When setting up your forex IB business, there are two options to apply. Either as an individual or as a business or a company. While there are no differences in IB rebates/commissions, irrespective of the type of IB set up that you choose, there is a huge difference in the way the IB applications are processed.
Forex IB as an individual
This is the most common and easiest way to get started. Whether you are good at marketing or have prior experience of being a money manager, starting off as an individual IB brings you quite a some benefits. Faster approval, to name one.
IB applications are generally subjected to the forex broker’s compliance team’s scrutiny. While applying as an individual, you are only obliged to provide your latest proof of address which could be either your latest bank statement or valid utility bill and a photo ID such as passport or your drivers license.
Operating as an individual Forex IB means that your IB commissions are paid to your bank account. In some cases, forex brokers do allow you to withdraw via eWallets as well.
The downside of operating as an individual is that with some forex brokers, your trader referral links are embedded with your IB name. While some traders do not really mind, a few traders are quite picky and insist on knowing their introducing broker. In cases such as these, it is highly likely that you will lose out on your referral as such kind of traders tend to switch to a well known IB company or a business.
Another aspect to look into is the rebates. While not all forex brokers encourage rebates, there are some forex brokers who have managed to devalue the playing field by opening their doors to rebates. This resulted in many established IB companies being able to offer high rebates by driving volumes. Such scenarios is definitely something that does not work in the favor of an individual IB.
Forex IB as a company
Setting up a Forex IB as a company takes a bit longer in terms of IB application approval and can get complicated if your company has multiple share holders. When applying to become a Forex IB as a company you are expected to provide your company registration certificate, share holder structure and individual share holder proof of ID and address verification.
Besides the above, some forex brokers insist (depending on your location) to by financially regulated by a local financial authority. Applying for a financial license means that you have open up your balance sheets and your business to the financial body’s scrutiny besides having to pay huge upfront fees.
From a business perspective, if you are just starting out, it doesn’t make sense to pay the fees upfront only to appease your forex broker. In such cases it is better to apply as an individual rather than make things complicated.
The advantages of setting up your Forex IB business as a company means that you can be more professional in your approach and if there are marketing budgets available, this could be put to great use to gain more traders in your kitty.
Forex IB – Local laws and regulations
There are some local laws and regulations that one must adhere to in order to operate a legal forex IB business. For example, in the US, you cannot become a Forex IB unless you are regulated by the NFA and other regional financial authorities.
Some countries outside of US as well require full regulation even before you can think of starting a Forex IB business. It is always adivsable to check with a local business lawyer on such matters before you start off as a Forex IB.