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until one grows, something that may end up costing a brand and even its directors and shareholders their aspirations of ever becoming regulated in the future.”


Staying legal


Platis says being regulated is important for a start up as it adds weight to it from a client’s perspective. “Tere is an undoubtedly increased marketing value in a regulated firm versus an unregulated one. Especially in these times, where the protection


of investors’ money is as important as returns. A regulated firm can demonstrate such protection by reference to the regulator and the jurisdiction it is under. Tis is why EU-regulated FX entities can be seen to be growing so fast recently.”


Stephen Leahy


“Budget for and hire attorneys, consultants and technology providers who have existing global clients and who are knowledgeable in global regulations. Few MTP firms operate in just one jurisdiction now, so a global perspective by all parties influencing strategic decisions is necessary.”


Te legal jurisdiction of an FX brokerage firm will be one of the key factors on which to base the decision for the location of a start up, says Behnstedt. “Te recent regulatory discussions about the Dodd-Frank rules and their implementation plays an important role here,” states Behnstedt. “Obviously, from a brokerage firm perspective, the legal jurisdiction with the lowest regulatory requirement seems to be the best choice for location, but on the other hand clients want to deal with brokers where a proper trading environment has been ensured by respective legal requirements. So, brokerage firms need to balance the residence choice with their envisaged business proposition. Once the legal jurisdiction has been chosen we strongly advise consultation with local legal and tax advisors to work out a plan for successful registration of the company.”


Getting registered


On the steps required to make sure firms are properly registered, and all relevant legal and compliance requirements are met in the region they will be operating in, Platis advises that the key is doing your homework. He explains: “Te most important step in this direction is first to do your research, and do it well. Selecting a suitable jurisdiction to set up your brokerage is the most important step. One has to weigh between reputation and


24 | INSTITUTIONAL FX SERVICES - THE BROKERS HANDBOOK 2012/2013


cost to maintain a license in that jurisdiction. Getting a license is relatively easy and relatively cost efficient, if one chooses the right consultant, of course.” “However, the most important calculation is the operating cost in that jurisdiction,” Platis adds. “For example, think about the cost to maintain any necessary physical presence, compliance officers, internal auditors, and the frequency and depth of regulatory reporting, amongst other considerations.”


Leahy also notes: “Budget for and hire attorneys, consultants and technology providers who have existing global clients and who are knowledgeable in global regulations. Few MTP firms operate in just one jurisdiction now, so a global perspective by all parties influencing strategic decisions is necessary.” Tom Higgins, CEO at Gold-i, agrees: “Regulatory compliance is incredibly complicated so it is always worth going to an expert in the region that you are targeting. Gold-i has partnered with a number of compliance consultants who specialise in different regulatory regimes to address this need.”


Business models


On how firms can tailor their trading technology architectures to the specific retail FX business models they will be using, Cohen states that this is now straightforward. “Tey simply need to find a provider that offers trading technology that allows for the architecture to be designed and built specifically according to the brokers’ business models, and which is able to support any variation of business model in the


Brokerage Operations


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