How to create an STP Broker

I want to know how can create own STP broker
what are requirements and open sources API

Interesting Post, Following....

It’s not about technology — it’s about relationships. You need a prime broker/clearer to handle your settlement and you need to convince liquidity providers to do business with you so you can route your customers’ trades to them. It takes big bucks to get JP or Goldman to pick up your phone calls, let alone to commit tech resources to connect to you. To put things in perspective, I work full-time for a 20 million AUM company (~ 100MM after leverage is applied) that makes 5-8MM a year (trading a different asset class, not FX) and we have difficulty getting better terms than what Interactive Brokers can offer to retail clients like you and me...

You’re better off signing up to a white label program of a major brokerage.

I am writing this from my own experience, 13 years on FinTech side:

Through years i have seen good and bad examples, i want name any of them, but the bad examples have one thing in common, they are all undercapitalized from the beginning and cheap on staff and technology, basically one man show operation.

There are 2 paths to take :
1. Independent from the start - if you have money and experience, go for it Tiger
2. Whitelabel Path - if you are strap on cash and mostly have few clients.

Independent Path:
Before you start this hell of a ride ask your self what are your advantages in fx compered to other brokers . If you have some idea about it proceed further.

1. Start a company (offshore easiest and cheapest, not necessary bad if you know what are you doing, more flexible from trading point of view)
2. Acquire licensee for trading (offshore cheapest / STP cheapest example/ Cysec can be 225k, MM expensive- example Cysec 750k, depends on which regulation you want, these prices were in 2018 when i worked with them last time). Everyone like to see Uk licence but unless you have a huge number of clients from the beginning , its just a money burner for idiots.
3. Acquire BANK account - IMPORTANT part - quality of the bank depends on a location of the company and license
3. Buy Mt5 directly from MQ ( they are not selling MT4 any more), it could go from 125k
4. Acquire Liquidity provider,/s there are several options, but setup is 50k, depends on the quality of LP, and you will receive 0.1 spread, 1 usd commission and swap, from there you add your markup - this can be renegotiated. After setup there are ongoing fees. Plus you will need dealer to hire for the risk/regulator purpose.

You have set the bones of the company structure now its time to add meat.

6. Add CrM - rookies in industry neglect this part but this is a heart of your system, since the sales and marketing, IT will be using this like 1000000% everyday. I want name anyone, but there is best CRM for FX /Crypto/Exchange industry, 3 spaces bellow empty and the rest of the CRMs. Been using 7 of them so i know what i am talking about.
7. Add Payment methods - credit cards, Bank transfers, crypto, e-wire ( quality depends on your license and company location)
8. Add payment gateways - cards processors/cashiers ets, negotiate the price carefully since this will be either astronomically high or very cheap ( % processing fee)
9. Add Kyc platforms - this is optional, in case you want to be spotless in front of the regulators, and avoid losing bank account, being red flagged in PSP systems.

This above is easy part and you can set it up in 4 5 months, depending on your pocket, and on which doors to knock. I didnt write all the things you may need or not but for the setup of basics that will be enough.

Now you have a basic startup of the company, this is just to start,0 clients, 0 marketing, 0 staff. For everything of these 3 you need live cash, and it can scale up to a million in first year, if you want to do it right. Plus dont forget that you need to pay the winners if you are on MM license.

Now this can be challenging especially if you are not from the industry and have 0 contacts, and small amount of cash.
And yes you can cut corners and be cheap on staff, marketing and sales....if you have ready to go clients, or partner with marketing funnel which has high conversion rate.

I don't recommend anyone opening a company and starting independent path from the beginning if he is lacking the cash liquidity. I have seen like dozen companies starting fair, and then being forced to cheat clients in order to cover the operational losses. Basically this is a story of all Binary options brokerages and 60% of Fx brokerages/ there are few good examples.


There is a better way.
Whitelabel Path:
1. Start a company ( Malta, Gibraltar for example)
2. Choose a broker to piggyback on his license and infrastructure/Mt4/Mt4/Ctrader, this will cut you initial cost for 90% and save you money for marketing and sales. There are good brokers for whitelabels and bad ones....if its to good to be true it usually isn't true.
3. Develop your brand for few years to get experience and see if you are cut for this business
4. Market the brand....Market the shit out of the brand...buy the billboard on Times Square if necessary.
5. Create the team of crack wise professionals from Marketing/Sales, dont be sorry to spend money here, since these guys make you money.
If you are live after 3 4 years , its time to move on independent path but by then you will know what you are actually doing.

If anyone goes any of these paths, i can promise you this, you will meet most interesting people on earth( good/bad), get yourself in most questionable moral situations you can imagine( test for your character, know yourself), see the world, know the countries bureaucracy/banking system , and after some time you will wish to become a bee keeper and move to the country side.

Every now and then this place totally blindsides me when you see real quality posts. Fascinating stuff. I knew Cysec was cheaper but it's still eye-watering considering they're so lax in regulation.
Lazar did you actually set one up or were you brought in as a consultant?

I think the costs of this will also be interesting to be seen.

Hi Triphop,

I worked for few years as consultant in a company which provides legal services (Licensing, Banking) and tech solutions for brokers. Was very dynamic and fun to work there.

ha, I bet it was!
Slightly off topic - have you - or AlgerianGuy got any sense of how the industry is changing right now, either institutionally or from a retail perspective?

From my experience its changing in a good direction, KYC/AML procedures are finally more strict, and scammers finally going straight to jail. I also have worries about it. For example in not so far future, PEP and people put through some media in negative bias will be shut from accessing FX/Crypto/Stocks, since regulators are becoming more paranoid in regards of AML. So imagine you trying to open a fx account and you get declined because your name pops out for a bar fight 10 years ago, or because you were a local party leader or you stole pack of cigarettes' as teenager. Basically you will be in a mercy of the AML officer till the rest of your life. The technology is already here, its been used but not strict as it will be. As a society we are slowly drifting towards the Social points society, which will be kickstarted by financial industry...irony in purest form.

The FX industry is technically reshaping, 10 years ago everyone wanted to have stocks for trading in mt4, it turned out not so successful approach since not to many people know about stocks. Now days the holy grail is to implement shitcoins into platforms, unfortunately mt4 want do it,but mt5 can support them. If they iron out the issues and add reflections it could be a hit. Yes i know there are other platforms, like ctrader/ninja trader which are superior to Mt in almost every way, but unfortunately average user doesnt know how to use them in gross.

FX is always evolving, when ever the stocks and crypto go to decline cycles the fx will explode with liquidity, and vice versa. I think that biggest issue for FX was Boiler room approach, low tech workers focusing on a hotline, if you look RobinHood platform it proves that company can be mega successful with correct idea and high skilled people.

Just my 2 cents.

Got it, all makes sense thanks Lazar. From a personal perspective, I've already had run ins with AML, without any serious underlying AML problems! Can totally see that getting worse over time. But the calls from shonky new brokers have dried up, so some improvement

About platforms (charting, not execution)- I tried out every single platform I could find about 4 years ago, and MT5 remained the fastest most lightweight of the lot, in spite of it being free. The data integrity is woeful though. Have their been any big improvements to the others?

Regarding platforms there are improvements, i mean not to much in retails sectors a in institutional. Bloomberg is real a masterpiece, but i doubt that average Joe will even think about that platform. Some how i am not to fond on MQ, i have noticed that Institutions , i mean old ones not the new ones, tend to avoid it by all cause. Also there are platforms which no one ever heard in retails, but are formula one compered to MQ. All in all MQ is not bad, for the average user, i mean unless you need to offload 100 000 000 dollars worth in lot 1:1 to a market, but thats never gonna happen to retail brokers

agh, thought so. I use Refinitiv/Eikon, and they've upgraded their charts (worst in the world) with a white label of Tradingview. A ton better but you still can't import csv data so still lacking. I live in hope!
thanks for the updates