A broker is the financial agent between the trader and the market. The broker provides the trader with a trading platform where to invest, and a series of services such as market analysis tools, charts adapted to the trader’s needs or price history. In recent years, thanks to the democratization of investment, brokerages have become an increasingly popular and profitable business.
Below, we tell you how to create your own broker and the features it must have to be successful. Keep reading!
How to create a broker in five simple steps
- Create a business plan: As in every business opportunity, it is recommended to create a business plan that helps set a path and a defined strategy to check and see if our plan is profitable.
- Creation of a legal entity: A broker can be both a real person and a legal entity. The majority of brokers opt for the legal entity, since it is advisable to create a company.
- Obtaining the necessary licenses: Once the legal entity has been created, it is necessary to obtain the necessary licenses. Thanks to the European jurisdiction, obtaining the license in any European country will be enough to operate in all Europe, therefore, the easiest thing is to acquire the licenses in countries with a simpler regulation, such as Malta, Estonia, Cyprus or others.
- Trading platform: for our trading platform, we can choose between developing an in-house platform or choosing an existing provider; currently, the most popular provider is MetaQuotes, which currently has two versions available for sale, MetaTrader 4 (MT4) y MetaTrader 5 (MT5).
- Hire a liquidity provider: The task of the liquidity provider will be to give us access to the interbank Forex market. Here we will have to decide if we act as market makers, that is to say, we take counterpart in the transactions and therefore more risk, or simply pass the operations to the liquidity provider and keep the spread or commission.
Four keys to success when creating a broker
After the creation of our broker, the most important thing will be to offer the best features and services. We will have to focus mainly on:
- Coose the best platform: Although developing our in-house platform may be attractive, it is a long, expensive process and except for very specific needs it does not compensate for the use of a platform like MetaTrader. As for choosing the best platform, contrary to what you might think, MT5 is not an improvement over MT4, each one serves different purposes because while MT4 is designed specifically for Forex and simpler, MT5 is intended for a wider range of trading purposes such as CFDs, futures and stocks.
- Have the best features: In addition to a trading platform like MetaTrader, we will need tools, plugins and features needed to make the broker work and be successful, for example: social trading, Pamm, IB, binary options plugin…
- Have stable liquidity with no ups and downs: For this it is advisable to have agreements with several liquidity providers to ensure that we receive the best spreads.
- Having a bank account in order to dedicate ourselves to both B2C and B2B business.
Now that you know how to create a broker, what else do you need to do?
To sum up, creating a broker can be a very profitable business if it is done correctly and the right decisions are made. If you are interested in starting a trading platform, at Smart Broker Solutions we have a wide range of services that go from acquiring the license, to the creation of a complete trading platform. Don’t hesitate to contact us.