Feb 19, 2020
When it comes to opening your own brokerage - starting is the hardest part. Before you address the questions of client management, cost and promotion, it’s vital to take a look at the core elements that will define your business.
So what does a brokerage need?
Back in the day, buyers and sellers were connected by means of a trading floor and a phone. Needless to say, that’s no longer the case. A trading space as we know it today is an online trading platform, which is basically a computer software program used to process financial market transactions. Any broker has the choice of building a platform of their own or resorting to third-party solutions, which significantly lower costs and allow for constant professional support.
It goes without saying that platform choice is one of the most crucial parts of your brokerage, especially as a startup, as this is where your traders will be spending their time and money. If a platform is low on features, has multiple bugs, or doesn’t keep up with today’s retail market demands, it’s highly likely your traders will opt for another brokerage simply due to lack of appreciation for their trading space.
Today, data is everything. Your Customer Relationship Management System (CRM) is one of the tools essential to the functioning of your brokerage business. Relying on spreadsheets is hardly an option in the presence of advanced software systems that gather data and maximize interaction with your existing and potential customers, as well as Introducing Brokers (IBs).
When approaching leads, a CRM grants your sales team a treasure chest of information as to customer trading activities and client information. Further, for convenience purposes, a good CRM system today includes powerful back office tools and partner portals, aids at organizing KYC compliance, and helps convert customers in the most efficient manner possible.
Liquidity providers (LPs) offer liquidity solutions to brokers - this includes not just liquidity but also streaming price feed data needed by your platform. You need to consider numerous factors when picking a liquidity provider: from a long-standing trust record in the industry, to multi-asset liquidity options, a deep order book, a large instrument list for a generous trader offering, a quick execution and reliable feeds.
It is further advised to choose a regulated liquidity provider for safety purposes, as contracts with unregulated LPs have left many brokers in the lurch in the past.
A Forex business can benefit from the service of a PSP - Payment Service Provider. Brokerages require payment systems and solutions to cover various methods of deposits and withdrawals. Typical complications lie in jurisdictional regulations, as well as high transaction volumes, which are typical of the industry.
You’d also want to cover your clients’ preferred payment methods, which typically include credit and debit cards, bank transfers and electronic wallets. Security must always be catered for, the payment interface should be simple, and payments must go through swiftly. Although it may not seem like much, many established brokers can tell you that finding a truly reliable PSP took a fair share of their time. Research and a careful selection process is a must.
Your website is your business card. If someone decides to check out your website and stumbles upon a poorly designed, hard-to-navigate, no-content or content-overloaded page - you are likely not to score them as a client. Having a good design, backed by SEO-optimized content (so you appear at the forefront of Google search results) is a must, as is packing your website with all the information your clients need to know. Make your offerings and plans apparent and ensure your website appears simple and intuitive.
Another thumbs up would be to include a page on your company values and staff. This works up a personalized feel and grants a newcomer that sense of safety that is greatly lacking on the forex arena.
These are the five elements you really can’t deal without when starting out on your journey, but of course, it’s hardly all. Stay tuned for our article series, as we go from basics of starting a brokerage to true depths of making your business stand out in the market.