Currency trading can be a lucrative business when done right. With great tools, a keen business sense and a great work ethic, you can easily make upwards of $72,000 a year – in fact, that’s the average, as per Study.com.
However, getting started in the currency market is not as simple as getting a test, passing it, owning a certification and then finding a firm to work in. A trader’s license – a legitimate Forex trading license with the ability to trade within relevant jurisdictions – requires a little more initiative.
Why You Need a License
Currency trading involves working with an investment bank that possesses a large amount of certain tradable currencies, and then being a middle man between these giant banks and individual traders that want to make a profit off the market’s constant fluctuations.
However, because of the nature of the financial market and the people working within it, government authorities have always been wary of the possibility of fraud. To prevent this, brokers planning to work between the markets and traders need to prove that they have the means to keep their operation running without stealing from their clients or utilizing unsavory and illegal business practices to make a buck.
That’s why it’s important to get a Forex license before starting a brokerage business in any given trading jurisdiction, especially if you want to avoid being forced to close up shop and pay large sums of money in fines. On the side of the trader, finding a broker with a proper license and making sure they’re working with someone who went out of their way to prove that they’re the best of the best among legitimate brokers is paramount to a good trading experience.
In forex, people often end up moving and owning large sums of money. Working with the wrong brokerage means the potential of losing all that money in an instant. And it’s that exactly what traders want prevented – and it’s what you need to offer a guarantee against through a license.
Now to the bread and butter of the matter – actually getting your hands on such a said license. The best way to do it depends entirely on the country you’re in and the jurisdiction under which you’d like to facilitate your online practice. Your practice’s location determines the difficulty of getting a Forex license. Locations aren’t necessarily categorized by country, but rather by level.
Level A – Level A countries are Japan and the United States, and both require extremely stringent licensing rules. The US, for example, no longer gives out licenses, while for both countries, a minimum capital of $20,000,000 is required.
Level B – Right under Level A is Level B, wherein the UK operates together with Australia. A license can cost $50,000 and you’ll need a capital of about $100,000, with client funds included.
Level C – These are regulated by Cyprus, Malta, and New Zealand, and require similar costs to a Level B (and D) license, although the total capital costs and time process may be shorter. As with Levels A through D, a physical location is needed.
Level D – This includes Belize and the British Virgin Islands. The regulations for these countries isn’t quite as tight, but secure by all means.
Level E – This includes many other countries, from Nevis, Seychelles and other popular financial havens to islands in the Caribbean and some European countries like Latvia. Unlike many other countries on the list, however, Latvia allows trading throughout the rest of the EU with the right permissions, which is very handy.
If you want a Forex license to practice foreign exchange in Latvia and the rest of the EU, the services of a Forex bridge company like FXBS are absolutely essential to help mitigate any problems, and help smooth the process out.