Top jurisdictions to launch a brokerage in 2022 and why

Author: Baiana Kashaeva

Trading continues to become an interest, a hobby, and even a primary source of income for millions of people worldwide. As more new traders join the market, so do more aspiring brokers.

One of the main things that a broker who is just starting out has to do is decide where they will be based and what regions they will operate in. That decision will dictate many things down the line, including the cost of running the business, the amount and frequency of reports that will have to be provided to regulators, and the services that a brokerage will be allowed to offer.

This week, we wanted to take a fresh look at the current situation with jurisdictions for brokers and gain insight into where it is best to launch a brokerage in 2022. So, if you are interested in this topic, keep reading!

Top jurisdictions for brokers in 2022

There are many jurisdictions out there, but in this article, we will focus on the key ones that most established and aspiring brokers are considering for themselves.

Cyprus

Let's start by looking at Cyprus, one of the most common locations for brokerages to be registered. Getting a license in Cyprus takes three months on average and requires the broker to have a registered capital of a minimum of EUR 200 000.

The total costs are quite steep, considering the license starts at EUR 125 000, followed by the ongoing costs of lawyers, opening a physical office, and hiring several employees. This can be considered a downside, however, it enables access for brokers to the entire EU, which is a challenging but very desirable market.

The regulator is the Cyprus Securities and Exchange Commission (CySec).

Why is the Cyprus broker license so sought after?

Although it is not the cheapest and easiest option to have your company registered under CySec, it has many benefits. Brokers who can provide the necessary funds will enjoy complete access to the European market, which can be very lucrative.

On top of that, Cyprus is a well-known hub for financial companies with an entire infrastructure built around it. From streamlined processes to access to talent, running a brokerage in Cyprus, once you've secured a good lawyer, is a more straightforward process than regions where the industry is barely represented.

Malta

Malta is another popular destination for brokers. The Maltese market is not as big as Cyprus but is still well established with transparent rules and low political and economic risks.

The license cost is significantly lower and starts at EUR 2 600, with the registered capital requirement starting at EUR 125 000. The registration process takes a bit longer, with an average timeframe of six months.

The local regulator is the Malta Financial Services Authority.

Just like Cyprus, the Maltese license unlocks access to the European market. So, for brokers looking to work with traders from the EU, Malta can be a great choice.

Seychelles

Not every broker has the means to start their business with lump sum investments into licensing, registered capital, and other fees. For those on a tighter budget, there are great alternatives like Seychelles.

Brokers looking to register here will only need to pay USD 1000 for the license and have a registered capital of USD 50 000. The registration process usually takes three months.

The local regulator is the Seychelles Financial Services Authority.

Besides being an absolute paradise location, Seychelles offers relatively weak regulation and low registration costs, making it an excellent option for brokers who would like to dedicate less time to paperwork and administrative requirements.

Jurisdictions with high entry barriers

Although they are not as widely popular, we wanted to mention the jurisdictions with strict regulations and hefty requirements that can still be an interesting target to some brokers.

United Kingdom

The UK regulator is the Financial Conduct Authority. The registration process can take up to two years, with a registered capital requirement starting at GBP 100 000 and the license cost starting at GBP 22 000.

United States

Multiple authorities heavily regulate the US trading market. Getting everything approved and signed off can take up to 1.5 years in total, with a registered capital of USD 250 000 and the license cost that goes up to as much as USD 1 000 000.

The US and UK are both known for their strict regulations, complicated registration process, and substantial upfront investments.

Still, if the broker has the means and the motivation to pursue those markets, they will be able to enjoy the benefits of prestige and access to the citizens of those regions.

Why is regulation important?

Regulators often get a bad name for seemingly creating obstacles and making it more difficult for brokers to operate.

And while sometimes this really is the case, for the most part, regulators take on an important job that no one else wants to do.

More specifically they:

• Ensure that all market players are treated fairly.
• Enforce laws on the companies that protect the users.
• Monitor operations and prevent dishonest practices.
• Supervise and support brokerages.

Ultimately, regulators create a transparent, safe space for everyone, helping the market grow.

For more articles like this, please visit the Tools for Brokers blog, where we publish weekly updates on the industry, tips and tricks for brokers, and more.