How to Become a Forex Broker

Submitted by fxpros on Wed, 02/21/2018 - 08:28

Reuters recently reported that the Forex market sees over $5.1 trillion worth of currency trades every day. All the world’s equity markets combined don't even come close to this figure. The trading of big amounts of money every day is one of the major reasons why some people opt to become Forex brokers, including experienced traders.

Of course, like in any other career, you need hard work and discipline to become a successful Forex broker. Those who succeed can make a healthy living through trading, but an added benefit of becoming a successful broker is networking with other traders who can assist you in forming a money management fund in the future.

Understanding the Forex Market

Before you can become a successful broker, you need to have a good understanding of the Forex market. Make sure you fully understand the underlying principles behind currency pairings and different sub-disciplines that play a role in the field, such as technical analysis and macroeconomics. Be on the lookout for new jargon, pricing, orders, and anything else that can help you give sound advice to your clients.

That being said, don’t just rely on your own research. One of the most effective ways to learn about the Forex market is to talk to practicing or retired brokers. They will be able to give you practical advice that you will not be able to find in books. If you can't find any practicing or retired Forex brokers, search for online discussion groups.

Apart from advising clients, brokers need to ensure that their clients' software platforms are operating properly, meet their orders, and maintain an appropriate bid/ask spread, upon which you'll depend for revenues. Forex brokers need to be tech-savvy in order to meet their clients' demands.

Get your certifications

Take note that there are no strict educational requirements to become a Forex broker. However, a degree in economics or business would certainly help your chances of becoming hired by a brokerage firm, if you wish to pursue full-time employment.

Forex brokers' licenses can be obtained by taking the National Association of Securities Dealers Series 3 test. The organization offers review materials online but in order to take the test, you'll have to be sponsored by an already-licensed brokerage firm.

Getting hired by a firm or starting your own company

Joining a large, established firm will give you more stability at work. Some Forex brokerages may have merged with firms that offer futures trading as well, so you need to be knowledgeable on different investment types to give yourself a better chance of getting hired. There’s also the option of joining a smaller retail brokerage company.

If, however, you want to start your own brokerage firm, here are the six basic things you'd need to do:

1. Register your company in a local jurisdiction.

2. File an application for a Forex broker license at the US Security and Exchange Commission (SEC).

3. Open a bank account within the jurisdiction to collect funds from clients. Brokers must maintain the minimum capital required by Securities and Exchange Commission Rule 15c3-1.

4. Prepare legal documents including dealing manuals and agreements, anti-money laundering regulations, etc.

5. Find a liquidity partner that will clear your trades.

The key for anyone starting a career in Forex brokerage is to get advice from veterans in the field and learn from their experience. This mentorship will help guide you, especially when facing challenging scenarios in the future.

■ Blog (2018)