forex broker business plan

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Table of Contents

Introduction

1. Forex Market 1.1 Market Size ----------------------------------------------------------------------------- 4

1.2 Market Description -------------------------------------------------------------------- 4

2. Starting a Brokerage 2.1 Business Model ------------------------------------------------------------------------ 7

2.2 Technology ----------------------------------------------------------------------------- 12

2.3 Finance --------------------------------------------------------------------------------- 22

2.4 Marketing -------------------------------------------------------------------------------- 23

2.5 Licensing & Incorporation ----------------------------------------------------------- 26

3. Company Procedures (Company Structure) 3.1 CEO -------------------------------------------------------------------------------------- 32

3.2 I.T (Technology) ----------------------------------------------------------------------- 33

3.3 Marketing -------------------------------------------------------------------------------- 34

3.4 Sales -------------------------------------------------------------------------------------- 35

3.5 Support ----------------------------------------------------------------------------------- 36

3.6 Finance ----------------------------------------------------------------------------------- 37

3.7 Compliance ------------------------------------------------------------------------------ 38

3.8 HR (Human Resource) --------------------------------------------------------------- 39

4. Implementation & Timeline 4.1 Planning & Documentation ---------------------------------------------------------- 40

4.2 Entity Creation -------------------------------------------------------------------------- 40

4.3 Office Infrastructure ------------------------------------------------------------------- 40

4.4 Technology Setup --------------------------------------------------------------------- 41

4.5 Operational Infrastructure ----------------------------------------------------------- 41

4.6 Staff Recruiting ------------------------------------------------------------------------- 41

4.7 Revenue Generation ------------------------------------------------------------------ 41

Appendix–Definitions--------------------------------------------------------------------------------- 42

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Introduction: TheFollowingdocumentisintendedtodirectandGuideApexum’sCustomerswhointendto

establishtheirownForexBrokerage,whetherit’sanexistingoranewForeignExchange

(Forex)brokerage,thisguidewillprovideinformationthatisdescriptivetowhichitwas

generatedthroughresearchandbestpracticeprocedures,throughthisdocumentApexum’s

clientswillhaverelativeinformationregardingmanyaspectsthebusinessneedstoachieve

optimummarketpresenceandvisibility.

Apexum’sRole:

ApexumisaTechnologyProviderthatbuilds,installs,maintainsandsupport’sanyindividual

seekingabrokerageorpartnership,Apexumstrivestoaugmentanyexistingornew

business,Furthermore,Apexumseekspartnerstoelevatetheirexistingpresenceinthe

marketthroughApexum’sInnovativeTechnology.

Apexumisneitherabrokernoratradingcompany,Apexumwillstrivetoelevateanyclient

withtherelevanttechnologydemands,ApexumwillneitherholdEnd-Usermoneyneither

willitinitiatetradesinanymanner.

ApexumisNOTaTradingCounter-party

Contact information: Address: Cyprus Markou Mpotsari,33040, Limassol, Cyprus Telephone: +(357) 25262280 E-mail: [email protected] [email protected] [email protected] Skype: apexum.sales

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1.ForexMarket:

1.1MarketSize:

ForexMarketisahighlyliquid,decentralizedmarket,whereitexceedsonaverage$5.3

TrillionUSDperdayintotaltrading,ForexMarketconsistsoftwotiers:TheInterbankand

wholesalemarket,andclientorretailmarket:

• Approximately39%oftransactionswerestrictlyInterdealer(i.e.interbank).

• Approximately53%oftransactionsinvolvedadealer(i.e.bank)andfundmanager

orothernon-bankfinancialinstitution.

• Approximately9%oftransactionwerebetweenadealer(i.e.bank)andanon-

financialcompany.

TheForexMarketisdominatedbythesecurrencies:USDdominantvehiclecurrency

tradedat88%,EURisthesecondbeingtradedat31%,JPYbeingthirdat22%.Themajor

marketsareLondon,NewYorkandTokyo.

1.2MarketDescription:

ForeignExchange(Forex)marketisanemerginganduprisingmarketwithnumerous

disaggregatedplayers,ithasexpandedby35%from2010to2013reachinganall-time

highof$5.3trilliontradedperday,TheForexMarketconsistsofmanysegmentsthatare

explainedbellow:

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CentralBANKS:

• Bank:LargeBanks(Institutionalplayers)thatareclassifiedasasegmentofthe

inter-bankingmarketwhichareaccountableof53%ofallforextrading,in

conclusiontheymakethemajortradesintheForeignExchangeMarket.

• Size:Rangingfrom8-10largebanksandinstitutionsestimatedtobetradinginthe

totaldailytradedsumof$5.3trilliondollars.

• BusinessModel:Twofold:buyingandsellingcurrenciestoeachotheraswellasto

largercorporationswhoneedtoexchangetheircurrenciesintoadifferent

nominationinordertosetapriceonparticularcurrencies,towhichareusedfor

speculation,hedgingandcurrencyexchangeforinternationalcommerce.

• Spread:Lowspreadonmargins(i.e.1Pip).Pricesarepurposivelysetwithless

variabilitythansmallerplayers.

• Regulation:Well-regulatedonForexoperations.

PrimeBrokers:

• PrimeBrokerage:Largecapitalfirmsthatspecializeinprovidingfinancialservices

andSourceliquidityfromavarietyofexecutingdealerswhilemaintainingacredit

relationship,placingcollateral,andsettlingwithasingleentitytothetrading

industry.

• Size:Rangingfrom15-25totalPrimeBrokerage’stradingForex.

• BusinessModel:Modelisbuiltonpracticeofrehypothecation.Furthermore,Prime

Broker’sProvidehedgefundswiththeabilitytoborrowstocksandbonds.

• Spread:Lowspreadonmargins(i.e.0.2–0.4Pip’s),thesespreadsarelowdueto

primebrokersofferingcreditandservicestotraderswhousuallytradeonECN’s.

• Regulation:Well-regulatedonforexoperations.

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PrimeofPrime:

• PrimeofPrime:SecondaryPrimeBrokerage’s(CapitalFirms)specializingin

providingservicestotraders(ForexTraders)whorequiremicro-contracttrades.

PrimeofPrimebrokerage’s(PoP)occasionallyallowtradesofgreaterleverage,to

whichitleadstoplacinggreaterrisk.

(SignificantdepositisrequiredtobeavailableinordertoaccessPrimeofPrime)

• Size:Rangingfrom15-25PrimeofPrimeBrokerage’stradingForex.

• BusinessModel:Modelisbuiltonaggregatingtradesbytraders/smallForex

brokerage’s,to/withthePrimeofPrime’sowndesiredtrades.

• Spread:Lowspreadsonmargins(i.e.0.2–0.7Pip’s).(info:TheseFirmsprovide

accesstobothbankandnon-bankliquidity).

• Regulation:ReputableJurisdiction.

Broker:

• Broker:Firmsthatprovidecurrencytraderswithaccesstoatradingplatformthat

allowsthemtobuyandsellforeigncurrencies.

• Size:Exceeding100+Broker’stradingForex.

• BusinessModel:1)A-Model:Sendtradesfromtheirclientstolargeinstitutionsfor

StraightThroughProcessing(STP).

2)B-Model:Actas“DealingDesk’s”themselves,Tradingdirectly

againsttheirclients(ECN).

• Spread:HighSpreadonmargins(i.e.2–3Pip’s),(Occasionallyhigherindeveloping

countries(i.e.3–4Pip’s)).

• Regulation:Well-regulatedonForexoperations.

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1. Starting a Brokerage

1.1 BusinessModel:

ForexBrokeragebusinessmodelissegmentedintodifferentfactors,thereare:

1. StraightThroughProcessingBroker(STP)

2. ElectronicCommunicationsNetworkBroker(ECN)

TheseForeignExchangeBrokerage’sareusuallyreferredtoasNon-DealingDiskBrokers.

A. StraightThroughProcessing(STP):

• Definition:Straightthroughprocessing(STP):Aprocedurethatfinancialcompaniesusetooptimizethespeedatwhichtheyprocesstransactions.Thisis

performedbyallowinginformationthathasbeenelectronicallyenteredtobe

transferredfromonepartytoanotherinthesettlementprocesswithoutmanually

re-enteringthesamepiecesofinformationrepeatedlyovertheentiresequenceof

events.(i.e.AForexBrokeragesendingclientstransactionsautomaticallyfromits

platformtoitsliquidityprovider:A-Model).

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BusinessModel:

• Spread: Differencebetweenaskandbidprice,CalculatedinPip’s.CustomerBuyscurrencyUSD/GBPwithadifferenceinspreadof1.8Pip’s,

Thespreadisautomaticallylostbytheclientonceheplacesanorderonhis

platform,thissimplyisacalculationofprofitonthebrokerandliquidityprovider

side,towhichthebrokerprofitsfromthe1Pipandthe0.8goestotheliquidity

provider.

• Commission:DevelopingCountries:Abilitytochargeupto4–5Pip’s.

SecondaryCountries:Abilitytocharge1–2Pip’s.

• RevenueStream:Spread,Commission,profitisachievedfromefficiencyof

BrokerageClientTrade’s(CommissionperTrade).

• RiskLevel:Low

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B. ClosedLoopDealingDesk

• Definition:ClosedLoopDealingDesk:AprocedurethataForexBrokerageimplies

towhichaclientbuysandsellsthroughaForexBroker,theForexBroker,atthe

sametime,isacounter-partyofadeal.Ifclientsgetprofit,abrokerbearsaloss,

andviceversa.MostoftheclientsofaForexBrokerhavenoexperienceatthe

Forexexchangemarket,(i.e.AForexBrokeragecounter-partieshisclient’s

transactionsfromthetradingplatformtowhichtheForexBrokerkeepstheclient’s

tradesIn-House:B-Model).

BusinessModel:

• Spread:Differencebetweenaskandbidprice,CalculatedinPip’s.

CustomerBuyscurrencyUSD/GBPwithadifferenceinspreadof1.8Pip’s,




provider.

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• Commission:DevelopingCountries:Abilitytochargeupto4–5Pip’s.SecondaryCountries:Abilitytocharge1–2Pip’s.

• RevenueStream:Spread,Commission,profitisachievedfromefficiencyofaForex

BrokerageClientTrade’s(CommissionperTrade),aswellasB-Model,Counter-

Partyingclients(ClientLoss=ForexBrokerageProfit).• RiskLevel:High(ClientProfit=ForexBrokerageLoss).

C. Hybrid(STP+ClosedLoop):

• Definition:AproceduretowhichForexBrokerageusesbothA-ModelandB-

Model,wheretheBrokeragesendsaportionofitsclientsusingStraightThrough

Processing(STP)toitsLiquidityproviderswhichisA-Model,andtheB-Model

wheretheBrokerageCounter-Partytheotherportionofitsclientsandprofitsfrom

theirclient’sloss.BusinessModel:


• Spread:Differencebetweenaskandbidprice,CalculatedinPip’s.

CustomerBuyscurrencyUSD/GBPwithadifferenceinspreadof1.8Pip’s,




provider.

• Commission:DevelopingCountries:Abilitytochargeupto4–5Pip’s.SecondaryCountries:Abilitytocharge1–2Pip’s.

• RevenueStream:Spread,Commission,profitisachievedfromefficiencyof

BrokerageClientTrade’s(CommissionperTrade),aswellasB-Model,Counter-Part

clients(ClientLoss=ForexBrokerageProfit).• RiskLevel:Medium(ClientProfit=ForexBrokerageLoss/ClientTrades=Spread&

Commission).


1.2 Technology:

InternalTechnology:

AForexBrokerageNeedstohavethecapabilitytosupportitsbusinessanditsClients

services,throughtechnologyaForexBrokeragehasthecapabilitytoachieveeffectiveness

andefficiency,athoroughresearchwasdonetoprovidetherelevantinformationbelow,

thisinformationwillbeillustratedtofullyawareApexum’sclient’softhebestPractice’s

andProcedure’sneededtoachievetherequiredgoal’saBrokerageneed’s.


Asseeninthediagramabove,aForexBrokerageneedstohavethecompetenciesin

providingservicestoitsclients,aBrokeragemusthaveatfirstitsowncapabilityinorderto

provideclientswithsuchservices,inconclusionthetechnologydiagramcanbe

categorizedintotwosection,thesewillbeexplainedbelow:

A. Broker:

I. Website:Design:ABrokerNeedstohaveawebsitethatisUserExperiencedand

interfaceddesign(UX/UI),towhichtheFrameworkofthewebsiteisbuildon

customeranticipationandpredictionofclientaction(manydesigner’sare

awareandcapableofdoingsoindesigningawebsite)

PageNumber:AForexBrokeragewebsiteneedstorangefrom10–15Pages,

anexampleisprovidedinthiswebsite:http://yourbrokername.com/.

Content:RelativeandDescriptive.

II. CustomerRelationshipManagement(CRM):

Management:ABrokerageNeedstohaveaCRMinordertomanageclients

whethertheirnewclientsorpotentialones,aCRMgivesthecapabilityof

havinginformationaboutaBrokerageclientsandmanagingthem,thisgivesa

Brokerageanadvantageofbeingefficientandeffectiveincomplyingtotheir

client’sneeds,anexampleisprovidedtogiveaconceptualizingideaofaCRM:

http://www.apexum.com/crm.

III. AffiliateSystem:ABrokerageNeedstohaveanAffiliatenetwork,anAffiliate

Networkisonedigitalchannelusedinmarketing,itisusedbyForex

Brokerage’sasitisoneeffectivemethodinclientacquisition(Highconversion

rate),itgivesacompetitiveadvantageoverotherDigitalChannelsasit

guaranteesaLeadtoaBrokerageinexchangeofcommission.

http://www.apexum.com/affiliate-system


B. Client:

I. TraderRoom:thecentralhubwhereForexBrokerageclientscanmanagetheiraccountsand

tradingactivitieswiththeirBrokerage.WithintheTraderRoomarea,aForex

Brokeragehastheabilitytoaccessawiderangeoffeaturessuchas

registration,openingnewaccounts,depositsandwithdrawals,uploading

documents,Fundtransferbetweenmultipleaccountsandevencontactinga

clientservicerepresentative.

http://www.apexum.com/trader-area

II. TradingPlatform:Atypeoftradingsoftwareusedtohelpcurrencytraderswithforextrading

analysisandtradeexecution.Currencytradingplatformsprovidechartsand

order-takingmethods,Theseplatformscouldbeleased(Whitelabel,Grey

Label)orboughtbyaforexbrokerage,thereareafewprovidersofthese

platformsastheyarehighlycostlytomaintainanddevelop.

PlatformProviders:

1. Metaquotes:MetaTrader4,MetaTrader52. ACTForex:ACTTrader.

Andmanymore.


ExternalTechnology:AForexBrokerageneedstohavecertainTechnologyinordertoconnectwiththeForex

MarketandprovidetheServicefeedsfortheBrokerageclients,thesearetheExternal

RequiredTechnologyneededtobeestablishedinordertoprovidetheservicesintended

fortheBrokerageend-clients.

• TradingPlatformServer:ATradingplatformsuchastheMT4(MetaTrader4)consistsofbothaclientand

servercomponent.Theservercomponentisrunbythebrokerandtheclient

softwareisprovidedtothebrokerage’sclient’s,whouseittoseelivestreaming

pricesandcharts,toplaceorders,andtomanagetheiraccounts.

• TradingPlatformBridge:

I. TradingPlatformECNBridge:Atechnologywhichallowsuserstoaccess

interbankforeignexchangemarketthroughtheMetaTrader4(MT4)electronic

tradingplatform.MT4wasdesignedtoallowtradingbetweenabrokerageand

theirclient’s,brokers do not operate the bridge, so a Forex Brokerage client’s get the prices as they are from the liquidity providers.


II. STP(StraightThroughProcessingBridge):Straight-throughprocessingbridge

softwarehasbeendevelopedovertheyearstoallowtheMT4servertopass

ordersplacedbyclientsdirectlytoanECN(ElectronicCommunicationNetwork

andfeedtradeverificationbackautomatically.

• FixConnector: AllowsattachingMetaTradersystemtoanyFIXcompliantdestination,suchas

brokers,exchanges,ATS.Itsupportsallassetclassesandordertypeswhichare

availableinMetaTrader.GroupsofMT4accountscouldbestructuredinawayto

routeorderstoaspecifieddestination.

• RoutingEngine:HandlescommunicationwithvariousLiquidityProvider’sviaFIXprotocoland

allowstodynamicallychangethehedgingparameters(forexbrokerscanswitch

on/offparticularLP,addmarkupetc.)


TechnologyStrategyandProcedures:

TradingPlatformStrategy:

Platform:Asaplatform,abrokerageofferstheplatformtotheend-clients,aForexBrokeragemust

placecertainmechanism’sandstrategiesinordertomeetrequiredStandards,these

Procedureshavebeenlistedbelow:

1. Security:

• Authentication:Verifydifferentauthenticationmethodsusedintradingplatform

andtesttheseauthenticationmethods.

• Encryption:Provideencryptionmethodsusedonplatformandtestthemtosee

howviablearethefunctionalities.

• Firewalls:Verifyinstallationsandfunctionsofcustomersfirewallinorderto

complywiththehighestsecuritystandards.

• Authorization:Complywithcustomersidentificationwithprivilegedaccesstothe

platforminordertostatetherightsforeachaccount.

• Administration:Verifythepresenceofwrittensecuritychartsandprovide

appropriatefundamentaltrainingfortheinformationTechnologypersonnel.

• Testing:Testingshouldbeconductedinaccordancewithcustomerssupportteam

wheretheBrokershouldhaveaninternetserviceproviderapprovalinconjunction

withcustomersdatacenterteam:

1. VerificationofFirewall.

2. Authentication,verificationofanysecuritybreach(Ex:Dictionarypassword

attack).

3. Verificationofpasswordrobustness.

4. Verificationsofphysicalsecurityprecautionsforpersonnel.

5. Installationofanetworkanalyzer,networkmonitoranditsusagewhen

necessary.

6. Verificationofphysicalsecuritymanagementandrestrictiontocustomer

datacenterzones.


2. Capacity:

I. GeneralStandards:ForexBrokerage’smusthandlecustomerordersthrough

adoptingandenforcingwrittenproceduresreasonablydesignedtomaintain

adequatepersonnelandfacilitiesforthetimelyandefficientdeliveryofcustomer

ordersandreportingofexecutions.Furthermore,ForexBrokerageswhooperate

tradingplatformsmustadoptandenforcewrittenproceduresreasonablydesigned

tomaintainadequatepersonnelandfacilitiesforthetimelyandefficientexecution

ofcustomerorders.Theproceduresmustbereasonablydesignedtohandle

customercomplaintsaboutorderdelivery,execution(ifapplicable),andreporting

andtohandlethosecomplaintsinatimelymanner.

II. CapacityReview:ForexBrokerage’sshouldadoptandenforcewrittenprocedures

toregularlyevaluatethecapacityofeachelectronictradingsystemandtoincrease

capacitywhenneeded.Theproceduresshouldalsoprovidethateachsystemwill

besubjectedtoaninitialstresstest.Suchtestmaybeconductedthrough

simulationorotheravailablemeans.Capacityreviewsshouldbeconducted

whenevermajorchangesaremadetothesystemorwhentheBrokerageprojectsa

significantincreaseinvolumewhichshouldoccuratleastannually.

III. DisasterrecoveryandRedundancies:AForexBrokerageshouldhavecontingency

plansreasonablydesignedtoservicecustomersifeitherthesystemgoesdownor

activityexceedsreasonablyexpectedpeakvolumeneeds.TheBrokerageshould

useredundantsystemsorbeabletoquicklyconverttoothersystemsiftheneed

arises.Thesebackupsystemscanincludefacilitiesforacceptingordersby

telephone.

IV. AdvanceDisclosure:AForexBrokerageshoulddisclose,inadvance,thefactors

thatcouldreasonablybeexpectedtomateriallyaffectthesystem'sperformance

(e.g.,periodsofstress)andthemeansavailableforcontactingthecustomerduring

asystemoutageorslow-down.Thisdisclosureshouldbeprovidedtoeach

customeratthetimethecustomeropensanaccountusingamethodreasonably

calculatedtoensurethatthecustomerbecomesawareofit.

V. DifficultyPrecautionary:Whenoperationalobstructionoccurs,AForexBrokerage

shouldprovidepromptandeffectivenotificationtoanycustomersaffectedbythe

operationaldifficulties.Notificationcanbemadebyanumberofmethods,

including:

1. MessageontheBrokeragewebsite.

2. e-mailsorinstantmessages.


3. Recordedtelephonemessageforcustomersonhold.

4. Recordedtelephonemessageonalinededicatedtoprovidingsystembulletinsto

existingcustomers.

3. CreditandRisk-ManagementControls:

I. GeneralStandards:AForexBrokeragewho handle customer orders must adopt

and enforce written procedures reasonably designed to prevent client’s from entering into trades that create undue financial risks for the Brokerage or the Brokerage's client’s. Regardless of its business model: (dealer or straight through processor), a Forex Brokerage must also have policies and procedures in place to monitor its own proprietary trading, including open positions, and the impact those positions and any potential market movement or adjustments may have on the Brokerage’s ability to meet its capital requirement.

II. AccountControls:Anelectronictradingsystemshouldbedesignedtoallowthe

Brokeragetosetlimitsforeachcustomerbasedontheamountofequityinthe

accountorthecurrency,quantity,andtypeoforder,andtheBrokerageshould

utilizethesecontrols.Thesystemshouldautomaticallyblockanyordersthat

exceedthepre-setlimits.

III. SystemControl:Anelectronictradingsystemshouldalsobedesignedtoidentify

tradinganomaliesorpatternsthatindicateasystemmalfunction,especiallya

malfunctionthatcouldresultinunduerisktotheForexBrokerage.

4. Recordkeeping:I. GeneralStandard:AForexBrokeragewhohandleordersmustadoptandenforce

writtenproceduresreasonablydesignedtorecordandmaintainessential

informationregardingcustomerordersandaccountactivity.

II. ProfitandLossReports:Electronictradingplatformsshouldbeabletoproduce

uponrequestareportshowingmonthlyandyearlyrealizedandunrealizedprofits

andlossesbycustomer.Thereportshouldbesortablebythepersonsoliciting,

introducing,ormanagingtheaccount.

III. DailyTradeRecords:EachForexBrokerageshouldexaminedailyelectronicreport

oftrades,thereportmustcontainthefollowingdata:


1. Allordertransactionrecordsonadailybasis.

2. Alistofexecutedtradesonadailybasis.

3. Alistofallmoneymanagersonthefirstdayofreporting,withanychangesbeing

reporteddaily.

4. AlistofallpriceadjustmentsmadebytheForexBrokerageonadailybasis.

5. Alistofanyunusualevents,suchasasystemoutageor"fastmarket"onadaily

basisasapplicable.

IV. AssessmentFeeReports:Electronictradingplatforms(Ex:Metatrader4)should

generatemonth-endassessmentfeereportsforaForexBrokerage.Thereport

shouldsummarizethenumberofforextransactionsexecutedduringthemonth

andthesizeofthosetransactions.

6. TradeIntegrity:

I. GeneralStandard:ForexBrokerage’smustadoptandenforcewritten

proceduresreasonablydesignedtoensuretheintegrityoftradesplacedon

theirtradingplatforms.

II. Pricing:Tradingplatformsmustbedesignedtoprovidebidsandoffersthatare

reasonablyrelatedtocurrentmarketpricesandconditions.Forexample,bids

andoffersshouldincreaseaspricesincrease,andspreadsshouldremain

relativelyconstantunlessthemarketisvolatile.Furthermore,ifanForex

Brokerageadvertisesaparticularspread(e.g.,1pip)forcertaincurrencypairs

orprovidesaparticularspreadinitscustomeragreement,thesystemshouldbe

designedtoprovidethatspread.

III. Slippage:Anelectronictradingplatformshouldbedesignedtoensurethatany

slippageisbasedonrealmarketconditions.Forexample,slippageshouldbe

lessfrequentinstablecurrenciesthaninvolatileones,andpricesshouldmove

incustomerssupportasoftenastheymoveagainstit.

IV. Settlement: Anelectronictradingplatformshouldbedesignedtocalculate

uniformsettlementprices.AForexBrokeragemusthavewrittenprocedures

describinghowsettlementpriceswillbesetusingobjectivecriteria.

V. Rollovers: Ifanelectronictradingplatformautomaticallyrollsoveropen

positions,thetradingplatformshouldbedesignedtoensurethattherollover


complieswiththetermsdisclosedinthecustomeragreement,includingthose

provisionsdictatinghowtherolloverpriceisdetermined.AForexBrokerage

shouldadoptandenforceawrittenpolicydetailingtheproceduresitfollowsto

calculaterolloverorinterestchargesandpayments.Thepolicymustinclude

thefactorsthatareconsideredaswellasthenamesofanysourcesforthese

factors.

7. PeriodicReviews:

I. Review:ForexBrokerage’sshouldconductperiodicreviews(atleastannually,

butmorefrequentlyifthecircumstanceswarrantamorefrequentreview)of

anyelectronictradingsystemitutilizes.Thisreviewshouldbedesignedto:

1. Assessthesecurityoftheelectronictradingsystem.

2. Assessthereliabilityoftheelectronictradingsystem’screditandrisk-management

controls.

3. Ensurethattheelectronictradingsystemmaintainsrequireddataandiscapableof

generatingthereportsrequiredbythisNotice.

4. Ensurethattheelectronicsystemprotectstheintegrityofthetradesplacedonit

andexecutescustomerforexordersinafairmanner.

5. TheBrokeragemustprepareareportoftheperiodicreview,notingthescopeof

thereview,anyfindingsandcorrectiveactionandmaintainacopyofthereviewfor

futurepurposes.Theresultsofthisreviewshouldbereportedtothefirm’ssenior

management,includingtheForexBrokerageChiefComplianceOfficer(CCO),and

anyfollowupshouldberecordedandsignedbyseniormanagement.


1.3 Finance:

CapitalRequirements:

AForexBrokerageneedstounderstandandprioritieshisfinance’s,aBrokeragemust

securitizetheirtimeframefor1to2monthsinordertooperateandreachtheirBreak-

EvenPoint(BEP),inordertodosoaForexBrokeragemustimplementdifferent

proceduressuchasseparatingtheirfinancialsintooperatingexpensesandtrading

expenses,theseexpensesmustbesubjectedtofinancialprocedure’sandreportingto

highermanagerialpersonalinadailymanner.

Capital:MustbesufficientinordertoestablishaBrokerageFirm.

Assets:Mustbeprovidedtoemployeeuse.

OperationalExpenses:MustberevisedinordertoforecastandmaintainaBrokerage

Stability.

TechnologyLease:Mustberevisedandresearchedinordertomaintainoperational

expenses.

Revenue:MustbeforecastedandstudiedinordertomaintainBrokeragestability.

Profit:Mustberevisedinordertosustainanddevelopcompanybasedonprofit

percentagegoingtoBrokeragedevelopment.

ApexumhasprovidedaFinancialPlanforpublicuseinordertoprovide

eachindividualseekingtoestablishaForexBrokerageanadvantageofelevatingaBrokeragewithahighunderstandabilityoftheirfinancial

procurements:

ApexumFinancialBusinessPlanClickorFollowhttp://businessplan.apexum.com


1.4 Marketing:AForexBrokerageneedstoestablishabrandpresenceandvalueinorderto

achievestabilityintheForexMarket,ABrokeragemustperformcertainstrategies

forincreasingefficiencyandeffectiveness,aBrokerageneedstobeawareofthe

economicandsocialentitiestowhichgivesacompetitiveedgetothebrokerageof

marketacquisition,belowweshallexplainthemainpointsofmarketingprecisely

neededforForexBrokerage’stoacquireandmaintain:

I. AUDIENCE:

1. Location:Targetlocationofaudiencetobeacquiredasclients.

2. BuyerPersona:CustomerInformationregardingwillingtobecomeaclient

(Audience–Lead–Buyer–Customer)

3. Occupation:(e.g.ProfessionalForexTraderandTechnicalAnalyst)

4. Demographics:(e.g.male,40-55yearsold,British,Englishasafirstlanguage,lives

inLiverpool)

5. Interests:(e.g.ExpertAdvisors,AutoTrading,VPS,Indicators,Football,London

StockExchange,Blogging)

6. Behavior:(e.g.Tradeswithseveralforexbrokers,occasionallydoeshedging,trades

highvolumepositions,readsforexblogs,leavesreviewsonForexPeaceArmy,

participatesindiscussionsonForexFactory,activeonTwitter)

7. Challenges:(e.g.losingtrustinforexbrokerageduetoregulatorwarnings,negative

balanceprotectionsecurityconcerns)

II. ANALYZETARGET:

• ProvideOffersdependinguponmajorcustomerinterests.

• ProvideLearningandadvisorylibraryaswellasconsultation.

• ProvideSecurityinordertoin-lengthCustomerLifetimeValue(LTV).

• ParticipateinForumDiscussions.


III. CAMPAIGNSTRATEGY(DigitalChannel’s):Thediagrambelowexplainsthemultiplechannel’sneededtobefocusedonbytheForex

BrokerageinordertoAcquirecustomerswithhighConversionRateaswellasin-lengththe

Client’sLifeTimeValue(LTV):

• CONTENT:3-5articlespublishedonwebsiteorpartnersitestargetingwebsitekeywordandlinkingcalltoaction(CTA)tothelandingpageorWebsite.

• SEO&SEM:Compose10-20textadvariationsforsearchenginemarketing(SEM)campaigntotestandoptimizeforbestresults.SEMcampaignsareshowntobeoneofthemostefficientamongalltheotheradsforforexindustry.(Hint:ChooseKeywordsandBidsWisely).

• SOCIALMEDIA:Engagereaders,buildasocialmediafollowing,crosspromotebetweensocialchannelssuchasFacebookandTwitteraccountsandthenmarkettofollowers.

• ADEXCHANGE:Compose3-5variationsofthebannerstorunacrossGoogleDisplay,AdRollretargeting,socialmediachannels,mediabuyingandprogrammaticmediabuying.

• EMAIL:Setupamarketingnewslettertobesenttonon-convertedleads,arrangeexternalblaststhroughpartners,affiliates,introducersandsetupaworkflowforthosecompletingtheformsonlandingpage(s).


• AFFILIATE:1. Commission:Affiliatessendthemajorityoftraffictothehighestbidder.Create

anaveragepayout(CPA,CPL).

2. Investinconversionoptimization:

Advantage:offeringa$300CPAwitha5%conversionrate.

Disadvantage:$600CPAwitha2%conversionrate.

(HINT:AcquireprofessionalUXdesignersandconstantlytestlandingpage

variations(A/BTesting)tomaximizeconversionrates.)

3. Offersub-affiliate/IBprogram:enableaffiliateprogramtogrowexponentially

(affiliatesattractnewaffiliates).

• SALES:

LeadAttraction:

• Specialoffersanddeals:OfferDoubleleverageduringatimeframetosignupnew

accounts.

• SpecialCommission:OfferCommissionduringatimeframe.

• SmallerSpreads:OfferSmallspreadsduringatimeframeoronagivencurrency.

LeadAcquisition:

• QualityofProduct:BetterSpreads,lowercommission,fasterexecution,bigger

liquidityofForexProducts.

• BroadarrayofProductsAvailable:NumberofSymbolsprovidedtobetraded.

• CapacityandCapabilityofSalesDepartment:Conversionskills,sales-client

bonding,self-suggestion,consultation,conversiondirecting.

• CustomerSupport:MonitorTradeactivities,respondtoquestions,solve

Technologyissues.


1.5 Licensing&Incorporation:

AForexBrokeragemustacquirelicensinginordertoestablishtransparencyandinsure

credibilitythannon-regulatedBrokerage’sastheseBrokerage’sdonotoperateunder

strictregulations,dependingonthejurisdiction,lawsandregulationsdifferregardingthe

licensingofForexandBinaryOptionsBrokerage’s.Theregulationsthatareinplaythough

aremainlytoensureproperconductbythecompanyandtoensuretheyfollowall

legislationandregulationsetbytheselicenses.ManyForexBrokerage’sdecidetogo

throughthelicensingprocessasitassurestheirclientsofproperconductandinstilstrust

intheironlineactivities.

AdvantagesofLicensing:

Transparency:Theregulatorsinanyjurisdictionkeeprecordsofallformalproceedings

againsttheForexBrokerage.Atradercanfindoutifthefirmhashadseriousproblems

withclientsorregulators.

Safety:Aregulatedforexbrokeragemustkeepitsclients’fundsinsegregatedaccounts

thatarecompletelyseparatefromthecompanycorporatebankaccount.Thisisimportant

forthefollowingmainreasons:

• Itensuresthatcustomerfundsareprotectedandpreventscompaniesfromclosing

theiroffices,movingtheirclients’fundsaway,andabscondingwiththemoney.

• Itmeansthatacompanycannotusethemoneyinonetraderaccounttopay-out

anotherwinningtrader.

HigherCredibility:Regulationandlicensingincreasethecredibilityofthecompanyboth

bytheclients/tradersandtheemployees/staffofthecompany.

DisputeCenter:Unregulatedbrokerscanactasjudgewheneveradisputeisfiledagainst

them,whereregulatedbrokershavetoanswertotheregulatorwheretheirlicensewas

issued.Theregulatorinvestigateseachdisputeorcomplaintagainstthecompanyand

determinewhetherthebrokeractedlawfullyorunlawfullyinthegiveninstance.Their

decisioncanaffecttheForexBrokerage’slicenseholdingandinextremecasesthe

brokeragecanloseitslicense,cangethugefinesandcanlimitthebrokeragetooperate.


EstablishedForexCenter’s:

I. First-LevelJurisdiction:

USA(CFTC,NFA):

• TimeFrame:1-2Years.

• FreeCapital:$20Million(Clientdeposit’snotincluded).

• ReportingRequirements:Difficult.

• ServiceProvidedRequirements:HighQuality.

• MembershipFee’s:Startingat$125,000perAnnually(Compulsory).

• Website:https://www.nfa.futures.org/

Japan(FSAJapan):

• TimeFrame:1-2Years.

• FreeCapital:$20Million(Clientdeposit’snotincluded).

• ReportingRequirements:Difficult.

• ServiceProvidedRequirements:HighQuality.

• MembershipFee’s:Startingat$125,000perAnnually(Compulsory).

• Website:http://www.fsa.go.jp/en/

II. Second-LevelJurisdiction:

GreatBritain(FCA):

• TimeFrame:1Year.

• FreeCapital:$100,000(Clientdeposit’snotincluded).

• ReportingRequirements:Standard.

• ServiceProvidedRequirements:StandardQuality.

• MembershipFee’s:Rangingfrom$35,000-$50,000one-timeFee(Compulsory).

• Website:https://www.fca.org.uk/


Australia(ASIC):

• TimeFrame:1Year.

• FreeCapital:$100,000(Clientdeposit’snotincluded).

• ReportingRequirements:Standard.



• Website:http://asic.gov.au/

III. Third-LevelJurisdiction:(Hint:importantfeatureoflegalregistrationofthecompanyinthesecountriesisdealing

withtheEuropeanclientsandasimplifiedprocessofopeningacorporatebankaccount.)

Cyprus(CySec):

• Assets:OfficeRequired

• TimeFrame:6Month’s.

• FreeCapital:Startingat$30,000.

• ReportingRequirements:Simplified.


• MembershipFee’s:Rangingfrom$35,000-$50,000one-timeFeeforLegal

Services(Compulsory).

• Website:http://www.cysec.gov.cy/en-GB/home/

Malta(MFSA):








• Website:http://www.mfsa.com.mt/


NewZealand(FSP):








• Website:https://www.companiesoffice.govt.nz/fsp/

IV. Fourth-LevelJurisdiction:

OFFSHORE:

BritishVirginIslands(FSC):

• Assets:PhysicalorVirtualOfficeRequired.

• TimeFrame:3-4Month’s.

• FreeCapital:Rangingfrom$20,000-$30,000.




• Website:http://www.bvifsc.vg/

Belize(IFSC):






• MembershipFee’s:Rangingfrom$20,000-$30,000one-time(Compulsory).

• Website:http://www.ifsc.gov.bz/


V. Fifth-LevelJurisdiction:

(Hint:Forexlicenseisnotcompulsory)

Seychelles(CBS):







• Website:http://www.cbs.sc/index.jsp

StVincent(FSA):







• Website:http://svgfsa.com/warn.html

Summery:Essentially,regulationmeansthatthereisanindependentbodybetweenthe

traderandtheForexBrokeragethatislookingoutforthebrokerage’sinterests,making

surethateverythingisalwaysaboveboardandthatFairtreatmentisexercised.


2. Company Procedure’s (Company Structure)

ThissectionwillprovideindividualsseekingaForexBrokeragethoroughinformation

regardingrolesofformalization,centralization,levelsintheflatandhierarchystructures,

anddepartmentalizationinemployeeattitudesandbehaviors,aswellasDescribehowthe

elementsoforganizationalstructurecanbecentralizedtoreacheffectivenessand

efficiency,Furthermore,itwillprovideanUnderstandingofstructuresfororganizations.

Diagram:Eachdepartmentshowninthediagramisacompanyassetandcapability,these

departmentsarecompliedtoCEOdecisions,thesedepartmentsarestakeholderstoeach

other,themodelabovedemonstratesanorganizationalflatstructure,theflatstructure

hasbeenfavouredtospecificpointsleadinganorganizationtobettercoordination,

efficiency,centralizationandeffectivenessinaForexBrokeragedaytodayprocedures.

Furthermore,aForexBrokerageassemblingaflatstructurewillhaveacompetitive

advantageofexpandingeachdepartmentintomulti-levelswithoutanyfuture

complicationssuchasdecentralization,theStructureaboveisdisplayedtofurtherdevelop

awarenesstoanyintendingindividualseekingaForexBrokerage.


Department Responsibilities: 2.1 CEO:ResponsiblefordrivingoverallgrowthoftheForexBrokerage.TheCEOrelieson

Stakeholders(Marketing,Sales,Support,Finance,Compliance)intoachieveadecision

withleastimpactthatmightconflicttheBrokerage,aCEOcircleofmanagersand

departmentheadstofocusonspecificpartsofthecompany.


2.2 IT(Technology)Responsiblefortheoverallmaintenanceofthefirm’sservers,network,telephonesand

individualPCs.Additionally,theITdepartmentmustbackupallsensitivedataaswellas

haveanemergencyplaninplaceforunforeseenoutages.Thisfinalpointiscrucialfora

ForexBrokeragesincestabilityinonline-tradingisamust.


2.3 Marketing Thecontentofthewebsite,advertisements,promotions,emailsnewsletters,SEO(Search

EngineOptimization),SocialMediaPresence,planningseminars/expos,anddatagathering

areallresponsibilitiesofthemarketingdepartment.Aneffectivemarketingdepartment

willadapttonewmediumsofpromotion,andtrendchangesregardingthemarketing

industry.


2.4 Sales Responsibilitytoattractandconvertnewclients,butalsomaintainingrelationshipswith

existingcustomerstoensureasatisfactoryexperience,alargeportionofabroker’s

revenueisgeneratedfromtraderswhoarepleasedwiththeirbroker.Business

developmentaswellasIB(IntroducingBroker)relationshipsalsoplacedunderthis

category.Duetotheworld-wideappealofForexMarket,thesalesdepartmentshould

havetripleshiftofstaff(8hourspershiftoraccordingtotheagreementbetweenthe

employerandemployee(aroundtheclockshifts)).


2.5 Support Responsibilityofthisdepartmentistoprovidereal-timesupporttocustomers.This

includesansweringinquiresaswellasperformingspecificaccountrelatedrequestsuchas

deposits,withdrawals,andclosingaccounts.Tostaycompetitive,asupportstaffshould

alsohavetripleshiftofstaff(8hourspershiftoraccordingtotheagreementbetweenthe

employerandemployee(aroundtheclockshifts)).


2.6 Finance

Naturallyallmonetarydecisionsfallundertheumbrellaofthefinancedepartment.The

executionmodeloftheForexBrokerage,forexample,anSTPsetup,willmakeiteasieror

moredifficulttopredictrevenue.Manydepartmentswillworkcloselywiththefinance

departmentsoitisimportantthatthestaffiswellversedinallfacetsofthebusiness.


2.7 Compliance AlllegalaspectsofaForexBrokeragearehandledbythecompliancedepartment.This

includesaccounting,settlingdisputessuchastradeauditsaswellaslawsuits.Sincelarge

amountsofmoneyaretransactedbyaForexbrokerage,itisessentialtohavea

compliancedepartment.


2.8 HumanResourceThehumanresourcesdepartmenthasthesameresponsibilitiesasanyotherdepartment

inanybusiness.TheyareresponsibleforfindingqualifiedcandidatesforaForexBrokerage

andshouldworkcloselywithalldepartmentheadsinjobdescriptioncreationtoensure

thatitclearlyrepresentsthedesiredskillsforaForexBrokerageteammemberthatmay

beoutsideofthehumanresourcedepartment'sareaofexpertise.HumanResource(HR)is

alsoresponsibleforcreatinganemployeehandbookandmanaginginternalpersonnel

issuessuchasvacations,conflicts,etc.Officemanagementshouldberesponsiblefor

suppliesandinfrastructurevendorsandfallunderthepreviewofHumanResources.

CONCLUSION:Asseenabove,eachdepartmentwascategorizedandstructureddependinguponthe

forexmarketneeds,aForexBrokeragedealswithamarketthatis24/5towhicheach

departmenthasbeenplacedwithcarefulconsiderationandthoroughanalysisbasedon

experience,theI.T(technologydepartmenthasnotbeenincludedasthisstructure

assumesthetechnologyusedisoutsourcesanddependedonsecondpartyprovidersasit


isatimeconsumingandcostlyinvestmenttodevelopin-housetechnologythatsuite’sa

brokerageneeds.

3. Implementation & Timeline

Below are details displayed to aware on steps and processes to be followed in order to plan and execute effectively the requirements on establishing a Forex Brokerage:

3.1 PlanningandDocumentation

1. BusinessPlanCreation.2. CompanyProcedure,PoliciesandStrategy.3. CreateandsignPartnershipAgreement.4. ChooseCompanyname.

4.2 EntityCreation

5. CompanyIncorporationandregistration.6. OpenBankAccountandFundit.

4.3 OfficeInfrastructure

7. SelectOfficeLocation(PhysicalorVirtual)8. SetupPhoneNumber.


4.4 TechnologySetup9. OfficeNetwork(Server,Workstations,Printers)10. Internet,Telephonesystem,Fax.11. SelectingandRegisteringDomain.12. Website,Emails,Hubs,CRM.13. OnlinePaymentIntegration

4.5 OperationalInfrastructure

14. TradingPlatformSetup15. TestingPlatformSetup16. Liquidity&CoverageAgreements.

4.6 StaffRecruiting

17. HiringEmployees18. TrainingEmployees

4.7 RevenueGeneration

19. MarketingPlan20. MarketingTarget21. CustomerAcquisition


Appendix - Definitions

For the purposes of this document, and for an understanding of general industry terms, we have put together a list of terminology definitions:

1. Brokerage=legalentityallowedtoopencustomeraccountsandcollect

customermoney.�

2. Broker=anemployeeofthebrokeragethatisworkingwithacustomer.�

3. Introducingbroker=independentcompanythatisbringingcustomertothe

brokerin-�exchangeofremuneration.(usually1PIP).�

4. PrimeBroker=anentitythatiswillingtorepresentthebrokerageinallits

trading�transactionsandsettlethetradesinyourname.Usuallyrequiresa

securitydeposit.Couldbeautomaticormanual.Examples:Barclays,FC

Stone,JPMorgan,etc.�

5. ECN=electronictradingsystemwhichpairsofferanddemandwithouta

middleman(inthisCaseForex).

6. Forex=foreigncurrencyexchange.�7. Customerorclientorenduser=aprivateorcommercialentitythatopens

anaccount�withthebrokerage.�

8. Wire=electronicmoneytransfer.�

9. Self-traders=customersthatdirectthetradingoftheirownmoney.�

10. Managedaccounts=customersthatopenanaccount,depositmoneybut

whogive�powerofattorneyto3rdpartytoinitiatetradesintheiraccount.

�

11. Dealer=ahumanorcomputersoftwarethatwillmonitortherisktakenby

thebrokerage.�

12. Tradingplatform=acomputersoftwarethatgivesaccessviatheinternetto

humansor�othercomputerprogramstotheinformationtheyneedto

monitortradinginformation.�

13. Trades=(Forexcontext)theactionofbuyingorsellingonecurrencyinexchangeofforanother.�

14. P&L=profitandloss.15. Depositcurrency=currencyofthemoneydepositedinhisaccountheldat

thebrokeragebytheclient.

16. Margintrading=allowingthecustomertoborrowmoneyautomatically

whenheisplacingatrade.

17. Margincurrency=currencyusedforthemargin.�


18. Pair=(Forexcontext)asymbolonecantrade.�

19. Frontend=thepartofthetradingplatformthatseenbythebrokerage

client.�

20. Backend=partofthetradingplatformonlyseenbythebrokerage

employees.�

21. Rates=exchangerates.�22. Counterparty=entitythatwilltakesomebody’saccount,moneyandwill

allowthe�accountopenedtotradeagainstthedeposit.�

23. RatesandQuotes=(forForexpurposes)exchangerates.

24. SymbolsandInstruments=thedifferentexchangeratesacounterpartyis

monitoring�andcouldoffertoitscustomerfortrading.�

25. Marketing=theactionofattractinginterestfrompeopleandcollectingtheir

contact�informationforcommercialpurposes.�

26. Product=(Forexcontext)atypeofservicethebrokercanoffer.�27. Sales=theactionofsellingaproducttoacustomer.�

28. Basecurrency=inapairlikeEURUSDthe1stcurrency(inthiscaseEuro).�29. Lot=(Currencycontext)usually100000or10000ofthebasecurrency.�30. OpenP&L=thepotentialP&Lofatradeifthetradewastobeclosed

IMMEDIATELYbutwhichisstillopen.�

31. Balance=totalamountintheclientaccountNOTincludingtheopenP&L.

32. Equity=totalamountofaclienthasIFthetradeswereclosedIMMEDIATELY.

�

33. Pip=thesmallestamountacurrencywillmoveby.Either0.0001or0.01ifa

pairinvolvesJapaneseYen.�

34. Margincall=whenacustomerequityisnotenoughtocoverthemarginhe

usedto�borrowmoneytotrade.typically,allBrokeragesclosethecustomer

positionautomatically.�

35. Bid=priceatwhichonecanSELL.36. Ask=priceatwhichonecanBUY.�37. Spread=differencebetweenbidandask(spread=ASK-BID),calculatedin

pips.