Start a FX/CFD broker in the Marshall Islands

The past decade has seen a rise in the number of people looking to start a FX/CFD broker in the Marshall Islands. 

There are a few reasons why people may want to look at setting up a FX/CFD broker in the Marshall Islands. That includes low tax, low operational costs, and a low regulatory burden.

There are downsides to this as well, which we look at towards the end of this article. 

Before getting to that, we’ll look at how to start a FX/CFD broker in the Marshall Islands, what the costs are, and how long it will take.

Why start a FX/CFD broker in the Marshall Islands?

1. Low costs

The start-up and ongoing costs of running an FX/CFD broker in the Marshall Islands are a small fraction of what they would be in a developed market like the UK or Cyprus. Even compared to offshore regions like Mauritius or the Seychelles, setting up a FX/CFD broker in the Marshall Islands is extremely cheap.

2. No corporation tax

Like many other offshore jurisdictions, FX/CFD brokers based in the Marshall Islands do not pay corporation tax. This compares to many jurisdictions where corporation tax is in excess of 20%.

3. Low regulatory burden

Despite the fact that many brokers like to call themselves ‘forex’ brokers or ‘FX’ brokers, the product that they are actually offering are contracts for difference – CFDs. In the Marshall Islands, CFD trading is not regulated. As we’ll see, this is not always a benefit but for start up brokers looking to minimise their compliance expenses and workload, it often is. It also means there are no restrictions on leverage or deposit bonuses.

4. Anonymity 

Executives that start a FX/CFD broker in the Marshall Islands do not have to publicise information about themselves. For broker executives that want to maintain a high level of anonymity, this is obviously a big benefit.

Overview of FX/CFD license in the Marshall Islands

Steps to start a FX/CFD broker in the Marshall Islands

The whole process of starting an FX/CFD broker in the Marshall Islands, at least when it comes to company formation, can be done in about a week. FX/CFD brokers register in the Marshall Islands as international business companies (IBC) and applications to set up an IBC should take a day to be accepted or rejected.

There isn’t actually a huge amount to do and this process essentially boils down to…

1. Proof of ID and address

This can be done fairly straightforward way by taking a copy of a passport or driving license. Proof of address can be achieved using a bank statement or utility bill.

2. Checking company name availability and filling out application

You must check with the Marshall Islands company registry to ensure the name you want is available. Once that is done then you can fill out the application form to establish a company.

3. Filing application

Once you’ve completed the application, you can submit it. The establishment of a company can take place on the same working day sometimes, so this should not take long.

4. Set up banking solutions

This is likely to be the hardest part of your business. Setting up banking in the Marshall Islands is very difficult to do and may not even be possible.

How long does it take to start a FX/CFD broker in the Marshall Islands?

The actual process of setting up a company in the Marshall Islands is extremely fast and can be done in under a week. 

Because there is no regulatory regime in the Marshall Islands governing FX/CFD trading, there is no license to apply for. Company incorporation is typically the easiest part of setting up a broker – it is filing an application and waiting for it to be processed that takes ages.

This means that you can start your broker in the Marshall Islands as soon as the company is incorporated. 

However, there are two key things to keep in mind here.

Firstly, even if you have incorporated the company that may not mean you have all the back and front end tools you need to get your company operational. Setting up with a trading platform, CRM, website, and liquidity provider can be done quickly but still takes time.

The other thing to consider is banking and payments. As with other offshore regions, and this includes those with regulatory regimes like Mauritius or the Seychelles, it can be a huge headache getting payments set up in the Marshall Islands. This may even be the thing that takes more time and effort than anything else you need to do.

How much does it cost to start a FX/CFD broker in the Marshall Islands?

Starting a FX/CFD broker in the Marshall Islands should not cost you more than $2,000. The actual government fee for the set up is only $330. However, you cannot apply yourself and have to get an agent to do it for you, as in other offshore regions like St Vincent and the Grenadines.

We have seen company formation offers, which is effectively all you need, for substantially below the $2,000 figure. Anything far in excess of this amount is pricey and you should get a full explanation as to why the figure is so high before proceeding. 

What are the capital requirements for FX/CFD brokers in the Marshall Islands?

There are no capital requirements for brokers that are registered in the Marshall Islands. This is because there is no FX/CFD license in the Marshall Islands because CFD trading is not regulated there.

What are the yearly costs if you start a FX/CFD broker in the Marshall Islands?

The annual government fee for running an FX/CFD broker as an IBC in the Marshall Islands is $370. You can do this yourself on the Marshall Islands’ company registry website, so using an intermediary is not necessary but may be more convenient. 

Do you need a physical presence if you set up a FX/CFD broker in the Marshall Islands?

No, if you start a FX/CFD broker in the Marshall Islands, your corporate entity will be an IBC – as noted above. There is no requirement for IBCs to have a physical presence in the Marshall Islands.

Moreover, CFDs are not regulated in the Marshall Islands. That means, from the financial regulator’s point of view, there is also no requirement to have a physical presence in the Marshall Islands.

Are FX/CFD brokers regulated in the Marshall Islands?

No, CFDs – the product that companies calling themselves ‘forex’ brokers offer – are not regulated in the Marshall Islands.

Starting a FX/CFD broker in the Marshall Islands – positives and negatives

The Marshall Islands is very similar to other offshore jurisdictions where CFDs are not regulated. There are upsides to setting up there but also notable downsides which you need to consider before setting up there.

Setting up a FX/CFD broker in the Marshall Islands – positives 

1. It’s cheap and fast

Setting up an IBC in the Marshall Islands can cost less than $1,000 and be done in under a week. This is compared to developed markets which may literally end up requiring 1000x that amount of money.

2. There is anonymity 

IBCs in the Marshall Islands do not have to publicise their owners, providing a high level of anonymity to FX/CFD broker owners that want to maintain a level of privacy.

3. No corporation tax

FX/CFD brokers in the Marshall Islands do not have to pay tax on their profits. That compares to other developed markets where it can be in excess of 20%. Lower tax means you can either take more money out of the business or have more cash to reinvest for growth.

4 Low regulatory burden

FX/CFD brokers in the Marshall Islands are not restricted in terms of leverage they can offer to clients or with regard to things like deposit bonuses. There are also no requirements for things like accounts filing, meaning your operational costs are lower too.

Setting up a FX/CFD broker in the Marshall Islands – negatives

1. Banking is bad 

It will be very difficult for you to access banking and payments services as an FX/CFD broker in the Marshall Islands. This is likely to be your biggest problem as a broker.

2. Regulatory grey area and limited access to major markets

Being offshore means that markets which require you to have a license to operate within them are either off limits or in a regulatory grey area. 

3. Bad for reputation and brand

Unless you are able to be innovative and come up with some novel way of building trust with clients, the fact you are based in an unregulated, anonymised, offshore location is going to reflect badly on your brand and, beyond the regulatory problems described above, make it harder for you to onboard traders.

Marshall Islands FX/CFD license final thoughts 

Starting a FX/CFD broker in the Marshall Islands is likely to be most beneficial for a start up broker looking to keep its costs to a minimum.

If you have funding or are part of a larger broker group with enough capital to acquire a more developed and respected offshore jurisdiction, this is unlikely to be the place for you.