With 38.1% of global transactions, the Bank of England emphasizes the UK’s dominant position in the global FX market. However, this figure is down slightly from 43.2% in 2019. This steady leadership is largely due to a strict and respected regulatory system. When obtaining a brokerage license in United Kingdom, the reliability, transparency, and accountability of the broker are emphasized. If these rules are carefully followed, it can lead to significant growth and success in the UK forex industry.
Benefits of a Forex Broker License in the UK
Business Ecosystem
- Advanced technology and market access.
- London’s Role — сentral to global forex, enriching trade dynamics.
- Geographic benefit — enables 24/7 trading across time zones.
Regulatory Integrity
- Signals strict compliance, attracting discerning clients.
- Ensures safeguarding of funds and strict risk management.
- High regulatory standards, including AML/CFT compliance.
Financial Benefits
- No Corporation or Personal Income Tax on forex profits.
- Absence of Customs Duties.
- Avoiding Double Taxation — over 100 double-taxation agreements.
Operational Flexibility
- No Forex Controls — unrestricted currency conversion and transfers.
- Global Trading: Eases transactions in multiple currencies without regulatory hurdles.
UK Forex Regulatory Framework
Known for its strict supervision and international cooperation, the authoritative organization of the Financial Conduct Authority (FCA) regulates the forex market in the UK. Promoting a safe, transparent, and favorable trading environment, this system includes numerous laws and guidelines.
Legislations for Forex Businesses in the UK
Financial Services and Markets Act 2000 (FSMA)
Central legislation that outlines the FCA’s objectives, including consumer protection, market integrity, and competition promotion. It lays down the process for forex brokers to get and keep a forex trading license UK.
Markets in Financial Instruments Directive (MiFID II)
Even post-Brexit, this EU directive remains applicable, ensuring UK brokers’ access to European markets and mandating best execution for client orders.
Money Laundering, Terrorist Financing, and Transfer of Funds Regulations 2017 (MLR 2017)
These regulations require forex firms to perform risk assessments and adopt measures to prevent financial crimes, including appointing a Money Laundering Reporting Officer (MLRO).
Other Relevant Laws
- FCA Handbook
- Market Abuse Regulation (MAR)
- Terrorism Act 2000
- Anti-Terrorism, Crime, and Security Act 2001
- Counter-Terrorism Act 2008
- Proceeds of Crime Act 2002
Overview of Forex Broker Licenses in the UK
Depending on the specific functions of the company and the services it plans to provide, there are different types of forex licenses in Great Britain. To choose the most suitable option, applicants should evaluate their operating range, target clientele, and the nature of the services.
Types of Licenses
Proprietary Trading License (Dealer License)
For “market-making” activities and proprietary trading, including financial instrument transactions.
Agency Model License (Intermediary License)
Known as Straight-Through Processing (STP), this license matches client trades with liquidity providers.
Limited Broker License
Acts as an introducer or referral, focusing on sales and marketing without holding client funds.
Benefits
Proprietary Trading License
- Allows earning from spreads and market-making, potentially boosting income.
- Enhances the company’s stature, attracting clients seeking dependable services.
- Offers control over trading activities for effective risk mitigation.
Agency Model License
- Attracts clients preferring transparent execution without broker conflicts.
- Fosters client confidence through fair, interference-free order execution.
- Enables competitive spreads and better pricing via a vast liquidity pool.
Limited Broker License
- Simplifies operations by eliminating the need to manage client funds.
- Allows collaborations with authorized brokers, offering expanded services and potential referral commissions.
Forex Licenses in the UK and Cyprus
There are several requirements from the Financial Conduct Authority (FCA) to obtain a forex license in UK. First, it is necessary to have a capital of 75,000 to 750,000 pounds, as well as strong management and a strict anti-money laundering and counter-terrorist financing (AML/CFT) policy. In addition, applicants must ensure customer security, risk management and provide detailed documentation.
On the other hand, in Cyprus, it is necessary to establish a Cyprus Investment Firm (CIF) and obtain approval from the CySEC, taking care of the availability of capital in the amount of 50,000 to 725,000 euros. To strictly comply with CySEC standards for client protection and operational efficiency, the process requires careful organizational and operational planning.
Requirements for UK Forex Broker License
Starting a forex business in the UK requires establishing a legal entity, with the choice depending on your intended activities and the specific forex broker license UK sought.
Capital Requirements
- Proprietary Trading License — £750,000
- Agency Model License — £150,000
- Limited Broker License — £75,000
Legal and Operational Prerequisites
- Adequate resources to operate securely.
- Qualified team to run the business.
- Robust AML/CFT frameworks.
- FCA assessment for directors, officers, and significant shareholders.
- Maintain high ethical standards and fair client treatment.
- Protocols to protect client funds and manage risks.
- Internal framework for regulatory adherence.
- Mechanisms for money segregation (if applicable).
- Efficient handling of client grievances.
- Adequate cybersecurity measures.
- Accurate and timely reports to the FCA.
- Insurance — professional indemnity (if required).
- Payment of relevant fees.
Documentation Requirements
- Incorporation papers.
- Detailed business plan.
- Solvency proof and financial strategies.
- AML/CFT procedures plan.
- Compliance and risk management documentation.
- Security and complaints handling protocols.
- Proof of insurance (if needed).
- Payment proof for application fees.
- Identifications and proof of address for key personnel.
- CVs and written consents for background checks by the FCA.
- For non-English documents, certified translation is necessary, focusing on legal and financial accuracy and certification.
Establishing a Forex Company in the UK
Online Registration Overview
- The fastest route to registration, possibly within hours, crucial for obtaining a brokerage license in GB.
- Preferred structures include a Limited Company (Ltd) for liability protection and fundraising capabilities.
Ltd Forex Company Requirements
- At least one director/shareholder, with the option for them to be the same person.
- Designate a Money Laundering Reporting Officer (MLRO).
- Secure a physical office address in the UK for official mail.
- Set up a business bank account.
Incorporation Steps
- Select a compliant and unique company name.
- Acquire a physical office address in the UK.
- Prepare necessary documents, including certified translations.
- Appoint a director and other essential staff.
- Register with Companies House, paying a £10 online fee.
- Open a business bank account.
- Apply for an FCA UK forex license.
- Register for Corporation Tax with HMRC within three months.
- Register for VAT if above the threshold.
Required Documents for Incorporation
- Articles of Association and share capital details.
- Consent of the appointed director.
- Statement of Compliance (Form IN01) with detailed company information.
- Information on Persons with Significant Control (PSCs).
- Bank account details and proof of fee payment.
- Passports and residential addresses of shareholders and directors.
Obtaining a Forex Broker License UK
Key Steps
- Gather and prepare documentation, including certified translations if necessary.
- Ensure that all required fees are paid.
- Use the FCA’s online system to submit your application and documents.
- Verify that your business meets the FCA’s standards and coordinate with other regulatory authorities by a designated staff member.
- Preparing answers to additional questions or providing additional documentation.
Application review timeframe
Usually, the full review of an application by the Financial Conduct Authority (FCA) for a forex license UK takes approximately six months and 12 months if the application is incomplete. With the support of professionals, this process can be much more efficient and comfortable.
After approval
Subject to current regulatory requirements, the Great Britain forex license remains valid for an indefinite period. Fines, license revocation, or lawsuits are possible in case of non-compliance.
FAQ
Do I need to register a company in the UK for a Forex broker license?
The main requirement for obtaining a forex license Great Britain is establishing a company registered in the UK, usually in the form of a private limited liability company (Ltd).
What activities are covered by a forex broker license in the UK?
A forex broker license in the UK allows you to:
- Buying and selling currencies.
- Assisting clients in conducting forex transactions.
- Providing recommendations on investments in the Forex market.
Do I need a special bank account to get a Forex license in the UK?
A special bank account is required to manage financial transactions and client funds related to your forex activities in the UK.
What steps are involved in obtaining a UK forex license?
To obtain a brokerage license in Great Britain, follow these steps:
- Preparation and strategic planning.
- Application submission.
- Regulatory due diligence and assessment.
- Demonstrating financial stability.
- Setting up operational infrastructure.
- Undergoing compliance verification.
- Receiving approval and the license.
