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Starting a White Label Brokerage

  • #1
  • First Post: Jan 10, 2013 2:08am Jan 10, 2013 2:08am
Does anyone know how the settlement process works between the Forex broker and the liquidity providers?

I am interested in starting my own ECN forex brokerage firm for Chinese clients. But I am unclear how the settlement process works between what will be my brokerage and the liquidity providers, and what hoops I will have to jump through when establishing my relationship with them.

I collect the funds from my clients, and put them into segregated accounts with my firms bank; but how and when are client's profits and losses settled with liquidity providers? I cannot picture in my mind the mechanics of it, especially with multiple liquidity providers.

Any useful links would be gratefully appreciated.

Phil
  • #2
  • Jan 10, 2013 6:50am Jan 10, 2013 6:50am
If you are looking to start a white label brokerage, the broker who are delivering the infrastructure will be able to answer all your questions in detail.
  • #3
  • Jan 10, 2013 7:38am Jan 10, 2013 7:38am
Quoting dancingphil
Does anyone know how the settlement process works between the Forex broker and the liquidity providers?

I am interested in starting my own ECN forex brokerage firm for Chinese clients. But I am unclear how the settlement process works between what will be my brokerage and the liquidity providers, and what hoops I will have to jump through when establishing my relationship with them.

I collect the funds from my clients, and put them into segregated accounts with my firms bank; but how and when are client's profits and losses settled with liquidity...
Hello Phil.
The title and your questions seems to go in 2 different direction.
If you get a "white Label" it means you get it from a Bank or Broker that is already in the business and they will provide everything
for you... from The platform rights and tech support down to use their liquidity providers. So, the only negotiation is about
the spread or commission you have to pay them for your and clients volume. Every negotiation of these type the volume is what counts.
Most Banks/brokers have sliding scales for that and it may be that you do not make money when you start because your volume is too small.

You could also start from scratch and get your own license right from metaquote and get your own Liquidity provider ( 1 or more)
that would do all the settlement for you at rollover time. This Only a Bank can do. But is the same procedure, you have to negotiate with them
the commission to handle all your transactions and settlements.

Obviously the "white label" option is the one you need the least amount of investment to start with. Both ways
they will require a deposit for your operation, depending in the volume projected. Any Bank that is involved in money
exchange will talk yo you. Most of the Big Brokers offer white labels and all have different requirements.

Keep also in mind that the company you organize needs to be regulated to be able to hold clients money on deposits.
So, that is another bunch of money and paperwork.

I do know a company that would provide everything you need. Specially good bridges if you plan go ECN-

J.
  • #4
  • Jan 10, 2013 1:22pm Jan 10, 2013 1:22pm
Thanks J,

You have alluded to what has been starting to form in my mind; that I must deposit funds with whoever I buy the white label from to settle the net positions my clients hold at any one time. As my clients prove profitable, I then draw down from these deposited funds kept with the white label provider in order to settle my client's withdrawals on a daily basis.

The White Label suppliers I have held email discussions so far are not making it at all easy to understand any of the mechanics of it all.

Being an introducing Broker does not interest me at all, as I fully require to retain ownership of the client over the long run. Beginning as a White Label and then migrating to fully licensed MetaQuotes infrastructure at a later time when I have reached the critical mass to sustain that is my 5 year plan.

I was planning on using HSBC, but that was before the recent news that they have just settled out of court for $1.9 Billion in fees and fines for money laundering for drug cartels and terrorist groups has slowed that notion down to a halt. Pity, as I have read that they also handle 5% of all retail Forex liquidity.

Perhaps you could PM me the details of your guy, if he does not want his ID listed here in public,

Phil
  • #5
  • Feb 18, 2013 7:31am Feb 18, 2013 7:31am
Boston Technologies have a great guide if you haven't seen it already. Keep on dancing champ
  • #6
  • Edited 7:59am Feb 18, 2013 7:44am | Edited 7:59am
Quoting TheMaxx
Boston Technologies have a great guide if you haven't seen it already. Keep on dancing champ
Thank you,

I have progressed my understanding about all of this. I am downloading the guide, and so I thank you again.

I am finding their blog to be interesting

Phil
  • #7
  • Feb 18, 2013 9:13am Feb 18, 2013 9:13am
Quote
Boston Technologies have a great guide if you haven't seen it already. Keep on dancing champ

Interesting material... Thanks.
Keep It Simple
  • #8
  • Feb 20, 2013 6:03am Feb 20, 2013 6:03am
Hi Phil,
I work with a reputable Swiss asset management company and i can vouch for their white label offering.
Please PM for details.

Regards,
bruno
"Make good use of today, you'll never have it again"
  • #9
  • Sep 25, 2013 8:41pm Sep 25, 2013 8:41pm
Hello Everybody,

I ve question to dancingphil, beacuse the topic of White label brokerage interested me much, I am also think about this type of business and I would like be grateful for any kind of information about that. Did you started with this business? How goes it?

I would like to write on PM but I can not because, I must admit that I registered here a few minutes ago because I found this topic


Joe
  • #10
  • Sep 26, 2013 5:12am Sep 26, 2013 5:12am
From reading other posts by Phil he did not start his own brokerage. I believe he was looking into this to get better liquidity for his own trading.
  • #11
  • Sep 26, 2013 5:49am Sep 26, 2013 5:49am
Quoting TheMaxx
From reading other posts by Phil he did not start his own brokerage. I believe he was looking into this to get better liquidity for his own trading.

You are correct. I did NOT start my own brokerage or white label. I did consider it just to improve my own transaction costs with my large lot trading style. At least for now, I am happy with my choice of ECN brokers and my negotiated rates for spread and commission.
  • #12
  • Sep 26, 2013 5:55am Sep 26, 2013 5:55am
Quoting dancingphil
{quote} You are correct. I did NOT start my own brokerage or white label. I did consider it just to improve my own transaction costs with my large lot trading style. At least for now, I am happy with my choice of ECN brokers and my negotiated rates for spread and commission.
May I ask which ECN brokers are you trading with?

thanks
  • #13
  • Sep 26, 2013 11:00am Sep 26, 2013 11:00am
Thank you for answer

Could you also tell me whether in this type of business - I mean by that the White label broker business - is it possible to earn some good money, even then when I am not good forex player? First of all, I would just charge a commission for access to the forex market but after to read your answer I have some doubts, did I understand this type of business correctly.

I know now, you did not open you own white label broker but maybe you can answer on above because you have some research in this type of business. I know now, you did not open your own white label broker but maybe you can answer on above because I know you have some research in this type of business

Anyway, I would be grateful for any kind of help.
  • #14
  • Sep 26, 2013 11:55am Sep 26, 2013 11:55am
Quoting JoeH30
Thank you for answer Could you also tell me whether in this type of business - I mean by that the White label broker business - is it possible to earn some good money, even then when I am not good forex player? First of all, I would just charge a commission for access to the forex market but after to read your answer I have some doubts, did I understand this type of business correctly. I know now, you did not open you own white label broker but maybe you can answer on above because you have some research in this type of business. I know now,...
All your questions are answered in the guide
  • #15
  • Sep 26, 2013 12:46pm Sep 26, 2013 12:46pm
hi every one, let me explain how white label partnership works.

White label partnership is just an advance form of IB partnership. the only benefit is you can use your own branding on mt4 software ( i.e name and logo of your company etc)
only a broker who has full mt4 license can issue white labels. cost is 5000$ one off and 750$ per month which goes directly to metaquotes.
when you buy white label you decide how many pips you will share with main broker from spread ( usually main broker get 0.5 pip rest goes to person who buys WL)
however in WL partnership
- you can not collect funds from clients directly. all clients funds must be kept with prime broker.
- you can not manipulate data feed
- you can not decide which trades will be on dealing desk and which will go to the market (liquidity providers).

Now there are some brokers who offers full feature Whitelabel where you can
keep clients funds and where you can also manage trade risk by yourself but for such kind of whitelable they charge around 10-15k usd.

settlement of all the trades are done via A book and B book. A Book trades goes to market (ecn) and B book trades are dealing desk
risk offsetting is very easy you can transfer any trade to ECN manually or auto.

mt4 uses different gateways to connect backoffice with liquidity provider. a broker can directly connect with Liquidity providers (like integral, citi, fxcm) or they can use mt4 to mt4 gateway where they can transfer trades to another mt4 platform who is ECN broker.

direct liquidity provider charges based on volume usuall 10-20 usd per Million Lot however using mt4 to mt4 gateway you have to pay spread of ecn broker (usually betweem 0.1-0.9 pips)

hope this helps
  • #16
  • Jan 27, 2017 4:28am Jan 27, 2017 4:28am
Hi Guys,

I just created my profile with forex factory to understand how the forex brokerage business works . I am a seasoned trader and recently been approached to start a forex brokerage offering best retail services. I would like to know from fellow traders to understand a couple of things

1) Which platform .. cTrader or mt4 or both ? I am not interested in White Label solutions at this stage.
2) Best Prime of Prime ( I can't afford PBs directly )
3) Capital required to have a start up forex brokerage firm ? ( any cost you can think of ..technical , hardware, software , human resources , platforms, regulator's licences , websites etc ).

Any help is appreciated.

I can't open a new thread as i am Junior Member in forexFactory !
  • #17
  • Last Post: Sep 13, 2017 2:49pm Sep 13, 2017 2:49pm
Gamechange,

1.) The vast majority of retail trading is still done on MT4. I would recommend MT4 over cTrader, although I suppose it depends a bit on the type of client your business will be targeting. Most new brokers start as MT4 White Labels, the outside world can't tell if a broker is a White Label or a Full Server license holder. There are pretty significant ongoing costs for having a server license beyond the licensing fees.
2.) This is a complicated question. Where you can open an account with a PoP will depend on where your brokerage is regulated, what sort of deposit you are going to be starting with, and what types of flows you can guarantee/commit to. I think you need to decide what jurisdiction you base your brokerage in, then move from there.
3.) Capital required swings pretty wildly. The biggest question is going to be in which jurisdiction you base your broker, and what type of software you acquire. The other costs are pretty minimal compared to those two categories.

I have a blog on my website with a lot of write ups on this information.
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