After deciding upon a business structure and your desired level of regulation, you will need to determine how much capital you will set aside, and choose a bank with which to place your investment. It is important to balance the costs of conducting business with the need for working with a stable and trustworthy financial partner.
HOW MUCH NET CAPITAL SHOULD BE SET ASIDE FOR YOUR FOREX BROKERAGE?
To some extent, the amount that you will need to reserve for Net Capital (Net Cap) will be dependent upon where you have chosen to regulate your forex brokerage. Minimum Net Cap requirements vary between jurisdictions, and can range from zero to several million dollars.
Because regulation helps to establish credibility, you may wish to compromise by setting up in a locale which offers traders a proven level of protection but which will not force you to tie up too much of your funds. The type of Forex brokerage that you plan to open can also have implications for your minimum capital requirement, as some jurisdictions ask for higher amounts if your Forex brokerage will be acting as a market maker.
WHICH BANK SHOULD YOU CHOOSE FOR YOUR FOREX BROKERAGE?
When looking for a bank, you should choose one with a long history of solvency and expert management. Even if your account is held in a jurisdiction which provides guarantees for deposits, these guarantees may not be sufficient to cover your entire net capital investment. And even if a bank failure does not lead directly to a financial loss, there still can be negative implications due to the administrative costs associated with finding a new banking partner.
Take the time to weigh the benefits and disadvantages of both small and large banks. Small banks can often devote more time to building a relationship with a new Forex broker, and may be willing to negotiate in order to win your business. However, larger banks may be able to provide more convenient access to services, especially if regulatory considerations lead you to incorporate in an area that is situated apart from your primary physical location.
Because the global business environment also requires banks to thoroughly investigate clients prior to providing banking services, your banker will ask you to provide detailed information regarding your business structure and your management team in. Ultimately, the best bank for your Forex brokerage is the one with which you can build mutual trust while still paying reasonable fees for services rendered.