Procedure to obtain a UK Forex Brokerage License

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