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One of the things about this industry is that you speak to people and they will look morose and tell you that it’s over, the regulator is going to kill it, and there is nothing left to do but sit around waiting to die. Ok, maybe not that extreme, but the general trend is one of pessimism.
At the same time as people are saying that, the industry has never been bigger, the public’s interest in financial markets and their ability to access them is greater than it has ever been, and when you head to somewhere like Dubai, you see industry events on a scale that I would not have thought was possible.
To top that off, I regularly see people starting new brokers. Even in the UK, we’ve seen NAGA, Onyx Markets, and APM Capital all look to launch over the last 12 months, in what many people think of as a market that’s over regulated and not worth bothering with.
So what is it like to start a broker today? Are the people doing it insane? Or is it just that there is still business to be done out there in the big wide world? I tried to find out.
Do you need funding to start a broker?
I have personally not ‘been in the game’ that long compared to many other people who are on this mailing list and my sense is that one or two decades ago, it was much cheaper to start a broker than it is today. So do you need an outside investor to get started?
“You need funding for sure,” Vitalii Bulynin, Co-Founder and CEO of new broker Versus Trade told me. “Bootstrapping is not possible because of the number of services which simply cost you thousands per month. I think you should not start this kind of venture without having at least around $1m.”
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As Bulynin alludes to, part of the reason it’s so expensive to start a broker is because of the huge number of operational components that go into running one. Without wanting to go into overkill mode here, there’s getting a license, bank account, PSPs, CRM, email provider, servers, office, offshore offices, banking, website, data feed, bridge, and LP. Note that this is still not a comprehensive list!
It’s always hard to say how much all of this will cost but if you just took getting a platform and a license in the Seychelles or Mauritius, that could easily cost you over $300k for your first year.
The ballpark figure I have seen for starting a fully-fledged broker today, with all the ‘bells and whistles’, is $500k to $750k. This seems to be one of those stats that people get all antsy about so, yes, I admit you could do it for lower. However, if you were looking at getting a good license, good tech, and all the other tech plugins – servers, CRM etc – then that $500k to $750k range seems reasonable.
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Having partners helps
Another point to note here is that these figures do not include any big staff costs or any spend you’ll need to do on marketing. Both are obviously a big component of making your brokerage business work.
A common theme with every person I’ve spoken to who started a broker is that they had some existing partners to smooth out the process. To give an example, one founder that I spoke to about a month ago previously worked as an account manager. He had a good relationship with a number of large IBs and, when he launched, already had an agreement with them to move their accounts over. This made life much easier.
“If your team already has strong relationships with clients or affiliates willing to come onboard from day one, you can scale faster with much less spent on marketing,” said Francesco Ceccarini, Chief Commercial Officer and Co-Founder at Bullwaves, a new broker and prop firm that launched earlier this year. “In that case, bootstrapping is possible—but even then, you’d need solid starting capital to cover tech, compliance, and operational costs.”
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Overall my sense is that founders either do get outside funding or they figure out a way to start on the cheap and make use of prior relationships to kick off, before getting a more ‘complete’ (and expensive) set up down the line. Two smaller brokers that I spoke to went via the latter route and took no outside investment.
The other obvious route is to get serious cash from a major backer but I doubt there would be much interest from any major VC for starting a CFD broker today. I think if I was starting out now I’d go for crypto or some kind of stockbroking / ‘all in one app’ if I wanted big money from a mainstream VC. ‘New CFD broker in Mauritius’ doesn’t seem like something that will get you into YC.
Where to get regulated as a broker?
If starting a broker a decade ago meant going to CySEC, today the main options seem to be going to the Seychelles or Mauritius.
“Regulators are becoming stricter to whom they will grant a license,” Mohammed Yaghi, Founder and CEO of OW Markets, told me. “There are a lot of qualifications and criteria that are needed to get approved. In my opinion, the most respected licenses today are Seychelles and Mauritius.”
This was basically what every provider I spoke to said, which won’t be too surprising to readers. One point to note is that there do seem to be some fears about what will happen with the Seychelles. The regulator there made some changes earlier this year and, although nothing concrete has happened since, executives I’ve spoken to over the last six months from regulatory consultancies, tech providers, and brokerages have all expressed some concerns that there will be more of a clampdown there.
Another factor is the cost of buying versus applying directly.
“To buy [in the Seychelles or Mauritius] will cost you minimum $150k, and to set up will cost you 5-10 months,” said Bulynin. “So you do the math whichever is better.”
Some readers may know that you can get a company somewhere like Anguilla, St Lucia, or St Vincent and the Grenadines. As there is no regulation here, you basically just have to set up a company.
This is fast and cheap to do but it brings its own problems. You will struggle to get higher quality banking and payments will cost more. To top that off, partners and potential employees are more reticent about working with you.
Payment problems
And on the payments point, from the outside, this is an area that seems like it would be the key problem that new brokers face. If you are an offshore company in a high risk industry, my assumption would be that it is just a constant battle to keep payment channels functioning.
However, two founders noted that this was actually not that big of a deal. The problem was more a question of fees, as opposed to the ability to access payments and banking services. Others were less sanguine.
“We have found payments to be the most challenging aspect [of starting a broker],” said MarketsVox CEO Joe Roeder. “Regulators these days such as the [Seychelles] FSA are well organised and know their business and duties.
“However, operating in the ‘high risk’ category CFD brokers fall under, finding reputable banks, payment providers and e-wallets can often be challenging to obtain. Especially when looking for stable options to provide a seamless journey for our clients. We like to think we have a very good foundation now, but it has taken a number of years and is a never ending journey to stay ahead of the curve.”
The latter point is arguably the key one. The payments operations of brokers are opaque and something they are reluctant to discuss with yours truly. But on one occasion where I got a ‘deep dive’ into how it worked, the main takeaways were trust and time – it took this broker about four years to have a process that ‘worked’ and establish the relationships needed to make it function smoothly. New brokers by definition don’t have longevity but they can leverage existing relationships.
“Without a doubt, [payments and banking are] the most challenging part of the entire process,” said Renato Pezzi, Chief Operating Officer at Bullwaves. “Setting up corporate banking and payment infrastructure requires more than just paperwork—it requires relationships. Even before incorporating the company, you need the right introductions to avoid endless onboarding delays. And your corporate structure must be crystal clear to avoid red flags.”
Hiring people, keeping people
Another big factor of starting a firm is actually getting people to help you run it. This is obviously made easier if you have the financial backing to hire them, but it’s still difficult for other reasons.
“I would say hiring people has been the hardest part,” VersusTrade CEO Bulynin told me. “When you are new, people lack trust in you and your brand, so you have to rely on colleagues and connections. Apart from that, get ready to spend tens of hours in interviews for basic jobs, if you actually want to find good people.”
As with the other points, this was something of a common theme among the other new brands that I spoke to. For example, one executive noted that their ‘start up team’ had not factored brand into their activity at all. The result was that it was much harder to hire people than anticipated, as many potential employees wanted to work for an established player.
It’s worth reiterating here too that hiring people is expensive. The initial costs cited earlier do not cover it but even having a small number of staff will ultimately push you into the hundreds of thousands in added operational expenses.
Hidden surprises?
The final query for our start up friends was whether there was anything that they found unusually difficult or surprising when starting a broker.
This is probably a reflection of the fact that all of them had prior industry experience, but there was nothing too crazy here. Maybe it would have been different if we looked at prop.
“Something which has been surprising is the rise in costs,” said Yaghi. “You do your budgeting and then your trading platform surprises you with price increases. Another thing is choosing the right team to support you in your vision. This is definitely a vital part of any broker’s success. What is difficult is to align them together with your vision and to make sure that you can still continue and operate even if you have to replace them or do new hiring.”
For our friends over in Italy, the surprise has been more psychological. Starting a broker is hard work and brings with it a lot of stress.
“People underestimate the emotional rollercoaster of launching a broker,” said Filippo De Rosa, Co-Founder and Partner at Bullwaves. “It’s a 24/7 business, and the market is unforgiving. But if you do it right—putting client trust, transparency, and execution quality first—the payoff is worth it.”
Meh.
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