Introduction
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 services 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 its permissions across the European Economic Area (EEA). This is done through passporting.
Forex brokerage license UK - Foreign Exchange (FOREX) brokerage licence categories
There are three types of licences:
(1) Dealing on own account (Dealer Licence) - this licence is equivalent to "market-making" and involves position-taking which includes in the conclusion of the 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.
Forex brokerage license in the UK - 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
Forex brokerage license UK - License Requirements
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 activities. Firms must also demonstrate that their key persons running or managing the firm are 'fit and proper' to perform their functions.
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.
Appropriate resources - your firm must demonstrate that it has the appropriate financial resources, skills and experience of those managing 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.
Next Steps
Buckingham Capital Consulting is a leading international consulting firm, specialising in payment services, electronic money, banking and investment services. We are able to advise you on the best course of action and strategy based upon your business plan and financial product or service. We can help you with licencing, compliance, operational setup and related services, including, obtaining banking facilities. For more information, visit our website on www.buckinghamcapitalconsulting.com.
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