White Label Forex brokerage business Handbook: The Essential Guide

What is a Forex Broker?

Forex brokers are individuals or firms that that are engaged in the provision of brokerage services to traders, including but not limited to the provision of the trading platform through which the actual foreign exchange trading takes place. Though forex brokers may operate as self-employed, independent entities, since they operate within the forex ecosystem which is governed by rules and regulations in each jurisdiction, they need to abide and operate according to these defined set of rules. Forex brokers have full control over the entire trading activities and thus they are in a unique position to not only monitor but also advise their clients/traders on current market conditions as well as on the forex conversion rates. Since they own the technological means that facilitate trading, such as the trading platforms and applications, they can easily make updates, improvements and changes to these means to accommodate market conditions or customer needs.  

What Services are typically Offered By Forex Brokers?

  • They provide a trading platform through which trades are executed online
  • They develop and customize software, applications and tools to enhance the trading experience
  • They assist traders in the buying and selling of tradable assets
  • They provide access to information and news feeds to facilitate trading decisions
  • They help traders understand price movements and increase their chances for profitable trades
  • They can easily produce and implements updates to trading platforms and relevant tools
  • They have more control over the entire forex business cycle than white label providers

What is a white label forex broker?

The term white label is widely used in the world of commerce to denote a product that is either produced or manufactured by one firm, which is then being packaged and branded under a different company name, chosen by the firm which is the one that puts it on offer on the market.

Such a white label arrangement is mutually beneficial as it allows the manufacturing company to concentrate on best making the product or service, while the second company can concentrate on how to best market and more effectively sell the product or service.

The forex industry could not escape the overall trend for white label solutions. In fact, it is highly preferred for the implementation of white labelling because it is an industry with many opportunities, potentially highly lucrative and thus it attracts a high number of new entrants. High demand for online forex services and the room that exists for offering a differentiated array of products and services both allow and encourage new companies to tap into the online forex market, whether in the actual provision of the services or in the technological solutions side of the market.

Therefore, in the world of forex trading white labelling programmes mean that a firm buys another firm’s product or service, be it a trading platform, trading software or trading brokerage services and then markets and sells them under its own brand.

As is the case in any other industry, white labelling in the forex world is mutually beneficial for both sides, the provider of a white label service and the buyer and marketer of that service or product. This is true because those on the provision side, can gain additional income for the sale of their already developed trading platforms and software without having to worry about marketing and advertising directly to traders, while those brokers who buy the white label offering can immediately enter the market without have to spend time and effort in developing platforms and software from scratch. Instead they can direct all their efforts and skills in the attraction of new clients. This can be achieved through asking the original product provider to customise and brand the product to suit the needs of the white labeller. This arrangement is almost always faster and much cheaper than doing everything from scratch on their own, and therefore their effort to maintain the existing and gain new customers is greatly aided.

Partial vs Full White Label Solution

If you are interested in becoming a white label forex broker then you have two available options in order to do so, namely partially or fully.

Before differentiating between the two, it is important to keep in mind that the term partial should not lead you to except a solution that comes to you for free or with a heavy discount. Instead, a partial white label is not one with a lower fee but one that offers actually a partial solution. More specifically, while a “full” white label solution is made up of two key components, i.e. a branded trading platform and being able to directly accept deposits from clients/trader, the “partial” solution lacks the second element. In other words, the “partial” white label means you get the trading platform branded with your name and logo but does not provide you with the ability to take deposits from customers.

Consequently, the partial solution is easier to implement, but since the white labeller is unable to directly take customer deposits, this means that customers should send their money directly to the licensed broker that is the provider of the initial platform. What this means in practice is that, while in the case of a full white labeller there is complete anonymity for the clients of the white label brokerage, in the case of the partial white labeller the firm licensing the trading platform has access to customer data.

This difference aside, under both the partial and the full white label arrangements the same fees apply in terms of platform customization and rebranding and the same options and opportunities are available.

How to start a forex white label brokerage?

Resorting to outsourcing certain business activities and white labelling products or services are becoming increasingly popular ways of operation for firms in today’s highly competitive globalized business environment, due to the associated benefits in terms of saving time and increasing profit.

If you are thinking of becoming a forex white label your first step should be to identify your target market of potential traders, as understanding their needs and demands will help you choose the right white label provider in terms of the offering of their trading platform and associated technologies.

Though the cost of acquiring the white label solution, which shouldn’t be excessive and the implementation time required, which shouldn’t be too long, are important factors to consider, your utmost consideration when choosing to invest in a white label forex brokerage solution is acquiring a top product in terms of the trading platform and associated technologies, as this will help you more effectively sell this offering to clients.

Your prospective clients, i.e. forex traders, place immense importance on their transactions being executed in a secure, fast, reliable and accurate manner and in an environment that is completely transparent and honest and leaves no room for dodgy manoeuvres and manipulation. Thus, you need to choose a white label platform that can offer a trading experience that is secure, stable, seamless and hassle free, if you want to be taken seriously and stand a chance to succeed in attracting clients.

Moreover, to be able to survive the competition in the fast pacing and ever evolving forex world you need to choose a white label service provider whose offering is highly customizable and highly adaptable to change, and which surely operates across a range of devices, including mobile ones.

You also need to ensure that your white label provider not only undertakes the continuous updating of the product it is offering but that they also ensure to offer you continuous training and education so that you always keep abreast of new technologies and changes and are better equipped to take on the demanding market conditions and ever-increasing client demands.

And because when buying a white label forex solution, you are essentially entering a partnership with your provider, then it is crucial that you build a relationship of mutual respect, trust and understanding that is fostered from both sides. Your white label provider should be ready, willing and able to extend help, assistance and expert guidance whenever and wherever you need it, as otherwise you stand little chance to succeed.

What are the Costs of Running a White Label Partnership

White Label Forex Brokerage Costs

The obvious costs associated with running a white label forex brokerage are those already explained that pertain to the initial set up fees and the fees required to rebrand, market and manage the trading platform. Besides these however, you need to keep in mind that a white label brokerage is just like any other business, so running one also entails other types of expenses.

Such costs and expenses vary depending on the way you set up your business and how you choose to operate. For example, if you decide to only have on online presence or if you choose to have a physical location, i.e. a brick and mortar base to operate from, where you will be able to meet clients in person or offer one to one training or every training for larger groups. If you go with the second option then you obviously need to factor in the expenses for renting a space, running the office, paying bills, perhaps even paying for security and depending on the location you choose other occupational fees charged by local authorities.

Another obvious cost is the cost of hiring the right type of staff, since it would be suicidal to try to run a brokerage single-handedly. Here again the costs will largely depend on how you decide to structure your firm and which business model you will adopt, but you will definitely need people to handle your marketing, customer service and support, accounting, management and IT issues.

If you opt for the partial white label option, which, as already explained, does not allow you to directly take deposits from customers then costs will be less, while if you choose the full white label option then you will have the added complication and added expenses associated with setting up merchant accounts for credit card funding etc.

Irrespective of the structure you decide to adopt for your white label forex business, bear in mind that careful and wise thinking is required from your part about all the possible costs and expenses you are likely to incur. You should have a clear picture of these before you actually set out on the endeavour as this will allow you better plan and manage your budget and will give your business a better chance to be financially viable and lead to success.

White Label Programs and the Law

White Label Forex Brokerage and the Law

If when you are thinking of setting up a white label forex brokerage you get fearful of all legal and regulatory matters, you are right to feel this way!  As the Forex market grew in numbers, traded volumes and impact so have the laws and regulations that govern it. In this sense, compliance to the regulatory frameworks that exist around the globe has become a painstaking and daunting task. In fact, in some countries, like for example the USA they are flat out impossible and this has led to the demise of most small brokerages and white label providers.

Some claim that large governments across the globe act in this coordinated and very strict manner, not in order to protect traders and investors, but so that they can lure them back to more traditional trading markers, such as stocks and futures, instead of trading on the alternative, online global market of foreign exchange trading.

Irrespective of the reasons that lead to greater regulation and scrutiny over brokers, however it is an undeniable fact that anyone wishing to enter the forex world, even as a white label brokerage should treat all matters that have to do with laws, regulations and legal obligations with the utmost caution and care.

Starting a white label brokerage some thirty or even twenty years ago was a far less complex affair and very few and low legal hurdles had to be overcome. Clearly, today this is not the case, but the complexity of the legal and regulatory compliance required largely depends on the location of the licensed broker that you will work with to be your white label solution provider, the location from where your own business will operate or where it will be registered and, of course, the location of the customers you will be targeting.

Let us illustrate the case through an example. If you choose to buy your white label solution from a US firm, then be prepared for a steep mountain of legal and regulatory headaches. This is so because in the USA all brokers, as well as their IB and white label affiliates are required by law to be registered with the NFA (National Futures Association) and are thus regulated by the CFTC (Commodity Futures Trading Commission). These two bodies implement the very strict US regulatory framework when it comes to forex trading and are bound to make your life difficult. Moreover, even targeting US clients without actually being based in the USA also puts you under the jurisdiction of the NFA and the CFTC, thus, unless you are prepared for a steep mountain of laws and obligations, you should forgo the targeting of US-based customers as well when your forex business will be established outside US borders.

What you need to find out is whether the country where you plan to form the entity through which you will be operating your white label forex firm requires you to be registered and obtain licenses there. The situation varies depending on each country, and there are several countries where you can set up your company and be faced with a very lax regulatory framework concerning forex trading. However, even in jurisdictions with more lax requirements you need to make the differentiation between your place of incorporation and the actual base of your operations, since if you choose to have a physical location and meet clients there you might still come under the scrutiny of the regulator. So, bear in mind that it is possible to be incorporated in one location and have your base in another.

It is true that running your own forex business does come with a fair share of legal implications, but careful preparation and an educated and wise choice of partners and jurisdiction could lead you easily out of the woods. No need for desperation, just tread with caution so that the often tedious compliance requirements will not curb your way towards success.

What Trading Platform Should I Choose to Offer?

Successfully running a white label program depends largely on taking the right decision with regards to the trading platform and/or software you will be using. One big mistake to avoid is resorting to some obscure proprietary platform that certain brokerage firms offer for free. If you do so, then your potential customers, who will be unfamiliar with such a platform, will be very reluctant and hesitant to open an account and deposit their money. Another drawback, that many underestimate is that opting for a less known or completely unknown platform entails a steep learning curve to begin with, and an equally long one if you ever decide to change your white label provider. As a general rule having to learn a lot of new things and ways of operation tends to put potential customers off.

So, how can you mitigate the risk of choosing the wrong platform and thus jeopardizing your entire online forex brokerage white label endeavour right from the onset? Simple, go with the industry standard! In the case of online retail forex trading the closest to such an industry standard is the Metatrader 4 platform, in short MT4, which was developed by the MetaQuotes company and launched back in 2005. Despite the fact that the same company went on in 2010 to release the MetaTrader5 platform, the MT4 still remains the most popular and widely used forex trading platform in the world, the preferred trading venue for brokers and traders alike.

This preference both by millions of traders as well as by hundreds of brokerages around the globe day in day out for more than fifteen years, is partly due to the numerous additional features that the MT4 offers in order to improve one’s trading experience. These include, but are not limited to, an abundance of historical data, ample free demos and guides, free charts and charting tools as well as algorithmic trading through the use of so-called robots or expert advisors.

The MT4 is therefore the platform we would recommend that you choose when you wish to become a white label service provider or a white label service user. Given this platform’s dominant position in the world of forex trading and the huge popularity it has and continues to enjoy over so many years with traders and brokers alike, choosing any other platform would be unwise, if not catastrophic.

Being the gem that it is, there is a fee to be paid for the use of the MT4. MetaQuotes charges both an upfront standard fee as well as a monthly fee. Fees change over time but you can expect to pay about $5,000 upfront and about $1,000 each month for each rebranded MT4 platform. These fees are subject to no exceptions and all licensed brokers need to pay them for every white label they sub-license. Some may even charge you additional fees for platform usage, but most do not. You may also find white label service providers who operate white label incentive programs, under which they cover these fees for you or rebate them once you generate an adequate volume of traders and trades each month. Explore your options and decide which paying scheme would suit you best.

Always however remember that once you get the MT4 you real work begins with customizing and rebranding it to help you stand out as a white labeller.

Are you really ready to start a white label business?

start a white label business

Although many decide to start a white label forex brokerage a significant proportion fails flat on their face. The reason for this is that they jump on the bandwagon before being truly ready to do so and with such credentials failure is not a surprise. Before hastily taking the decision to set up shop therefore, you need to take a deep breath, honestly examine your situation and only proceed if you are fully ready. If you are not, then it is wiser to take a step back, work on rectifying or remedying any deficiencies and then proceed. To help you accurately evaluate your current situation, read below the top three problem areas that usually lead aspiring white label brokerages away from success.

Reason 1: Lack of funds

To cut a long story short, if you don’t have money to spend in setting up your white label forex brokerage, don’t bother trying. We have already analysed that trying to launch a white label brokerage using some obscure, free platform is a suicidal move. So, if in order to succeed you need to use the MT4 platform, then you need to be able to cover the associated fee, both the one-off start-up amount and the monthly bill.  

If you still feel that footing that bill is not wise and are still tempted to go for a cheaper solution through some other proprietary platform that you find available, remember that this solution might mean less costs but it definitely jeopardises your chance for future success and your ability to attract customers, because it will be more difficult to convince them to trade via a platform that is less popular, less reliable and they are unfamiliar with. Also, even if against the odds you conjure up a way to build a good customer base through such a proprietary platform, then this automatically ties you down with that particular licensed broker and their technology for ever, limiting your future options.

As already explained, besides the platform related fees there are other expenses that you need to take into account when setting up a forex white label business. If your plan is to run a one-man show then think again, because that plan is flawed. You cannot possibly stand a chance to offer good quality service to traders to lure them to become your customers if you don’t have qualified staff that can ensure that your website is attractive and loaded with interesting content, that you offer excellent customer support and that you run a smooth venture in terms of accounting, legal and compliance issues and above all clever branding and marketing.

All these being said, there are some more cost effective options available and perhaps the smarter way to run a white label forex brokerage successfully is partnering up with a white label provider that will lessen the load for you as much as possible. To get a good deal however, you will need to ensure that you generate enough trading volume. If you can come up with the goods, i.e. traders that fund their accounts well, then you might be able to find a partner that rebates some of the costs provided you meet your trading volume goals.

Therefore, if you have no money you have to wait as you cannot build a forex white label business on drive alone. Perhaps you first need to start out as an Introducing Broker and make the shift once you master the skill of attracting traders and generating trading volumes.

Reason 2: Lack of experience in forex matters

Though you may read stories to the contrary, in reality there is no chance that you can succeed in the world of online forex if you know nothing about foreign exchange trading to begin with. Those with no idea or previous experience who think they can become top notch brokers overnight are plain delusional and soon meet their demise.

Though you always have the option of hiring people who know about forex, it is always better if as a businessperson that wants to go into this line of business you first-hand what it is all about, what it entails and what the avenues towards forex success are. You will thus need knowledge, proper guidance and some sort of experience, preferably solid one, from professionals in the field of forex exchange, cause after all it will be your money at stake.

Reason 3: Lack of that something extra

Let us assume you have the adequate funds and the adequate experience and knowledge on forex matters, are these enough to become a successful white label forex broker? Well, the short answer is no! If what you will be offering is just another standard venue for trading transactions, then why would customers choose you over any other competitor?

The world of online forex trading is fiercely competitive, so having a standard offering that does not stand out from the rest and is not adequately differentiated will simply not do the trick. Unless you already have a site that enjoys high traffic and existing clients that you could convert to forex traders, then you really need to find intelligent ways to incentivise potential clients in order to ensure that you will gain enough conversions.

Therefore, you need to put yourself in the shoes if your potential customers and have a pretty convincing and compelling reply to the question, “what’s in it for me?” and “what is on offer for me here?”.  Remember that gaining customers is just half the battle and that you need to ensure you also figure out ways to retain them as well. So, in short, what you need to do is figure out what extra or special you can put at customers’ disposal. If your answer is nothing, then you need to put your thinking cap back on and go back to the drawing board, until you figure out what it is that will give you that edge over the rest.  

Alternatives to White Label

If having read the above or you have just checked out what research says about the pros and cons of becoming a white label broker and you feel that you are not yet ready or equipped to become a forex white label broker, this does not mean that you should forget about venturing into the world of online forex trading altogether. Instead, what you should do is to examine the alternatives to white labelling. The best such alternative is becoming an introducing broker or IB for short. This kind of venture presents a path of lesser resistance that will allow you to enter the world of online forex trading in a manner t

Though through an IB set-up there is less room for branding and other possibilities that are offered by a partial, or full white label package, an IB venture may well be equally or even more lucrative than having your own private label brokerage. Your pay-out will come in the shape of rebate or commission that is en par with those payed out to white labellers, but you will have no initial platform set up costs, no monthly platform usage fees and no headaches regarding how to deal with processing customer deposits or complying with laws and regulations.  

This being said, it doesn’t mean that you can easily become a hot-shot forex IB without having any knowledge, understanding and experience of the forex world. However, if you for some reason try out as an IB and fail, the cost of such a failure will much easier to survive than if you had failed as a forex white labeller.

Moreover, when you sign an agreement with a licensed broker to become an IB and you manage to build a good track record and you can achieve good monthly trading volumes, it is entirely possible that the broker might even be willing to foot the bill for the rebranding of the platform so that you can become a white label start-up.

Conclusion

Success as a forex white label brokerage is not an easy task to achieve, it is though very possible and potentially highly lucrative provided you plan this carefully and you do not embark on the journey alone. Seek advice, guidance, assistance and expertise and don’t leave anything up to luck. If you are well-prepared and geared and ready to commit and put in the hard work, dedication and inspiration required, then there is no reason why you cannot be the next best thing in online forex trading.

Don’t jump head in and remember that there are always ways and expert help in place to help you save money, time and nuisances when setting up your own forex brand as a white labeller.

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George Milios

George Milios is the founder of onlineforextrading.net, the binary options and forex news portal which is dedicated to providing you with all the information you need to successfully trade.

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