Operating with no license: is it realistic in 2021?
The situation with licensing in Forex has drastically changed over the last five years: above all, new regulations hit the ability of unlicensed companies to accept payments, thus creating a significant obstacle for their operation
By Vasily Alexeev, CEO UpTrader.io
In this short review, we have covered the viable operating models of Forex brokers today. Perhaps surprisingly, despite the stricter legislation, there are always ways to work around the rules.
Amid the sweeping restrictions imposed on unlicensed brokers, it would seem that this model is obsolete, but such brokers are still there in numbers, and new companies continue to enter the market quite successfully. So, is it possible to work without a license? Easy: it takes one month and $2–3K to register a business in, say, the Grenadines, and only your passport is required.
There’s a downside, however—you won’t be able to accept payments through the banking system, bank card transfers, and well as advertise your business legally. You’ll also likely face problems with popular payment systems, you won’t be able to operate officially in jurisdictions where providing Forex services without a license is prohibited, and there are fewer and fewer counties where licensing is not a requirement. However, it’s not all bad. China and Thailand have long banned Forex, but hundreds of brokers continue to exist there. They work with local payment systems and operate perfectly fine. These systems work almost with any brokers—the key is to reach an understanding. Other than that, cryptocurrency payments are getting more popular every year.
There’s also the issue of trust—it inevitably arises because of the stigma attached to an unregulated broker. As a proof of reliability, brokers can connect to Serenity—it’s a smart contract-based blockchain escrow. Serenity guarantees the security of deposits and completely eliminates any potential misappropriation of funds in the accounts of clients. Serenity has already earned the trust of a wide audience of traders. The system is easy to integrate, and with the growing popularity of cryptocurrency, it’s important that all payments in Escrow can be processed through the crypto exchanger SerenityPay.io. It’s a win-win situation for everyone.
“Offshore lite” licensing
The second option is more complex and more expensive: registering your broker with at least some kind of legality. The most popular licenses are in Seychelles and Labuan (Malaysia). You’d have to pay €50–70K, and the registration would take about nine months. As a result, the broker receives a permit to operate in these countries.
The access to banking and the international transfer system SWIFT allows brokers to attract bigger clients. Such a license also means access to liquidity providers, and hence better trading conditions, which gives a competitive advantage. A Labuan license means access to Malaysian banks.
The main downside—such a license allows operating only as an STP (Straight Through Processing) broker. If a broker plans to work with A-book, STP is a plus. However, if we’re talking about a B-book broker or a hybrid model, this would make things difficult. Another downside is the annual expenses on staff and office in these countries, as it’s required by the jurisdictions: about $70K a year.
It’s also worth noting that these licenses still don’t give access to bank card transfers.
Mastercard doesn’t accept transfers from brokers without European or American licenses, Visa still does, but more and more reluctantly, and is expected to follow the example of Mastercard. Plus, these licenses don’t open the way for official advertising.
The most valuable licenses
The third path, the most valuable and most expensive, is acquiring a European or American license. The price tag starts at €1 mln, the waiting period is at least two years. As a rule, during this time, the company passes all conceivable procedures of business auditing, upon the completion of which a license will or will not be issued for your business. The upsides are obvious—all payment methods: SWIFT, VISA, Mastercard, any payment systems. All kinds of advertising: online, radio, TV. This option is obviously great for reputation and trust, and so forth.
The downsides are also there: aside from the high price, licensing also imposes restrictions on the trading conditions: the leverage is limited to 1:50, and it’s prohibited to offer and advertise bonuses. Any violations can result in massive fines. Revoking of the license is also a reality: in 2019, Russia’s central bank terminated the licenses of four brokers out of five.
The bottom line is that there always ways to operate despite the stricter regulations.
Read more about how to choose jurisdiction?
Dear clients, partners, and colleagues!
I wish you Merry Christmas and a Happy New Year. The end of the year is always the time when we look back to assess the results and, based on this foundation, plan the future. I sincerely wish that the business plans for the coming year are implemented fully and on time, and that the financial performance in 2022 is above and beyond expectations. And most importantly, may you and your loved ones be happy and healthy!
Vasily Alexeev, CEO UpTrader
2021 is almost over, and it is time to wrap up and make plans for the next year. Reflecting on the results helps us take another look at the work we have done and assess what we have done well and what we need to work on. It helps us evaluate the market situation and the competitiveness of our products and analyse trends in our business.
MT5 vs MT4
As is often the case in times of crisis, financial markets begin to rise. In those turbulent times, an uncertain future is fuelling the financial services markets. Therefore, brokerage firms keep opening and the demand for brokerage products is growing. It is interesting to note that all our new clients prefer an MT5 terminal, contrary to last year, when only MT4 was requested. With this trend, we can expect that in 5 years time, MT5 will completely take over. This change in preferences primarily has to do with the Metaquotes pricing policy. Currently, the cost of your own MT5 server is comparable to the cost of a White Label MT4, both averaging at $4000-5000. In this situation, brokers often make the obvious choice to buy their own server which leads to licences for MT4 not selling at all.
Recently, interest in cryptocurrency margin trading has grown. Almost everyone now gives 1:10 leverage and trading is available 24/7. In 2021, UpTrader clients were more likely to ask for cryptocurrency than Forex, although back in 2020, Forex was leading the way.
You could say that interest in social trading has been consistent for a year now. It is not a new trend but it is certainly growing. Our new service UpTrader Invest attracts clients and many brokers consider it a core product.
Platform for social trading
In 2021, UpTrader's team launched UpTrader Invest, a new platform for social trading. It is designed for MetaTrader 4 / 5 trading terminals and works in three modes: MAM, PAMM, and social trading. UpTrader Invest is easy to integrate, has a user-friendly interface and the highest copying stability thus solving the issue of losing trades. The service also has several reward calculation modes available. The demand for the platform was high even before it was released, and after the release, the popularity has grown many times over. It is especially true for the MT5 version, since our client reviews are more favourable than those of our competitors. The platform was also positively received by the professional community.
2021 is the year of CRM improvements. We are constantly improving the functionality and introducing new features to account for the constant feedback we get from our clients. This year, we have greatly expanded the flexibility of the withdrawal control and approval system which allows brokers to process requests faster and quickly detect fraudulent activity. We have also added an analytics feed to the CRM for all our clients.
The quicker we solve client problems, the better business our clients are doing, the stronger our relationship is. That's why we strive to provide the best possible service and implement a personalised approach. Each client is assigned a personal manager who is always ready to solve their problem as quickly as possible.
In 2022, we are planning to improve the design in UpTrader Invest, the appearance of charts in particular. The CRM will be enriched with a long-awaited module for the sales department consisting of many new features.
Launch market analytics feed in your Forex CRM
Which extra services do you offer your clients? If you think that a trading terminal, fast fund withdrawal, and copy trading services are enough to keep your clients loyal and satisfied, then you may not know your clients very well or have never tried to offer them something else.
One of the UpTrader brokers broadcasts a daily stock market analytics feed and technical analysis to its clients right in their personal account. Its CEO kindly allowed us to analyse their data for 2021. We considered two client groups: those who read analytics and those who do not. The results speak for themselves.
In 2021, customers who read analytics deposited on average 15% more per customer compared to those who did not use this tool. The median bill was 25% higher. At the same time, their trading volume increased by 230%!
Do you want the same results? Easy-peasy!
Daily up-to-date market analysis available in the trader’s room might increase the trading volumes of your company, resulting in more potential profit. This tool is already integrated into the UpTrader Forex CRM, however, only a few of our clients use it for additional sales.
Every day, market experts collect information, prepare materials, and publish technical and fundamental market analysis used by thousands of traders around the world.
This tool is already available to you in UpTrader Forex CRM. To begin broadcasting the feed, contact our support team, and you will gain access to an excellent tool for increasing sales and loyalty of your customers starting tomorrow.
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