Enabling you to deal on your own account, as a matched principle, or as a restricted broker
FOREX BROKERAGE LICENCE
MIFID or Markets in Financial Instrument Directive, is the EU's legislation that regulates firms who provide services to clients involved with 'financial instruments, such as shares, bonds, units in collective investment schemes and derivatives, and the venues such instruments are traded. MIFID II came into force on 3 January 2018.
You may provide forex or foreign exchange servies subject to obtaining authorisation for the relevant permissions from the Financial Conduct Authority. The Financial Services and Markets Act 2000 (FSMA) provides the legal regulatory framework for financial firms providing investment services in the UK. Once authorised, a regulated firm can provide their permissions across the European Economic Area (EEA). This is done through passporting.
Foreign Exchange (FOREX) brokerage licence categories:
(1) Dealing on own account (Dealer Licence) - this licence is equivalent to "market making" and involves position-taking which includes in the conclusion of transaction in financial instruments.
(2) Matched Principle (Intermediary Licence) also known as STP/straight through processing involves client trades being hedged with an equal transaction with a liquidity provider.
(3) Restricted Broker licence - This is an introducer or referral type of licence, permitting firms to conduct sales and marketing but not being able to hold client funds.
Initial Capital Requirements
Dealing on own account licence (dealer licence) - EUR 730,000
Matched Principle licence - EUR 125,000
Restricted Broker licence - EUR 50,000
Threshold Conditions - Firms are required to demonstrate at the time of their authorisation that they satisfy the minimum standards set by FSMA, namely the Threshold Conditions, for all regulated actvities. Firms must also demonstrate that their key persons running or managing the firm are 'fit and proper' to perform their funtions.
Location of offices - your firm's 'mind and management' I.e. directors, compliance and governance function, audit and risk functions should be in the UK.
Effective supervision - your firm must be capable of being effectively supervised by the FCA, including the complexity of your regulated actvitites, products, and how your business is organised.
Appropriate resources - your firm must demonstrate that it has the appropriate financial resources, skills and experience of those managing the your firm's affairs.
Suitability - Your firm must demonstrate competence and ability of your management, and that the affairs of the firm are conducted in an appropriate manner in the best interest of consumers.
When might a firm be executing orders on behalf of clients?
When a firm is acting to conclude agreements to buy or sell one or more MiFID financial instruments on behalf of clients. You will be providing this investment service if you participate in the execution of an order on behalf of a client, as opposed simply to arranging the relevant deal.
When we discuss your requirements, we will assess your business model, directors and senior management, their experience and suitability and your governance (risk & compliance), operations, structure, business model and viability, to ensure that you meet the state regulator's requirements. Following our assessment, we will provide you with a realistic and honest assessment on application strength, as well as making our recommendations, before we take on your application.
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Our fees and next step
Contact us for an initial assessment of your proposed project and we will provide you with your options and suitability. We will will then discuss your project and provide you with costing. Once you are happy and we are confident that you have a strong chance of meeting the regulator's requirements of being approved, we will then proceed with your project.
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