Forex for a trader
How to start your own forex trading fund

How to start your own forex trading fundStarting a Forex Fund. Forex, Forex Market, Fx, Foreign Exchange, forex directory, fx directory, forex trading, forex brokers, Forex Trading, forex, forex charts, forex quotes, currency exchange, fx, currency, valuta, exchange rates, currency charts, brokers, fx links, dealers, forex news, currency news, interbank, fx portal, currency trading, euro cross rates, live fx tick charts, currency forums, dollar, swiss, sterling, yen, currency brokers. Welcome, today is Sunday, 26 Aug 2018, 20:02 Times around the world » Starting a Forex Fund. Market conditions have never been better for setting up a forex fund. The number of forex funds and corresponding investors has grown as a result of expanding customer markets. Therefore, traders interested in starting a forex fund (or managing customer accounts) should familiarize themselves with the legal landscape as they consider earning a living in this profitable retail industry. An experienced and disciplined forex fund manager can earn a substantial income. Most forex funds to which we provide services are small. We often encounter people who have been trading accounts for others "under the table" and now want to formalize their arrangements. One key advantage to starting a forex fund is that the fund manager can legally accept compensation for his or her trading and advisory services. In many cases, the fund manager can legally advertise their services as well. This compensation can provide an excellent supplement to an existing income or it may allow trader to work as a paid forex adviser on a full-time basis. In our experience, many forex new fund managers also keep their "day jobs" for a while until they are certain this is the business they want to be in. Market conditions have never been better for setting up a forex fund. Whether you want to set up a fund or just invest in one, it is a good idea to understand the basics.

Is Running a Fund Profitable? Forex fund managers typically demand management fees of % to 2% of assets under management (AUM) as well as performance fees of 20% of net gains a ear. This income can be substantial. If you had a mere $2 million AUM and a 1% management ee and a 20% erformance fee, you would have management fee income of $140,000 ($2 illion x 1%) and (assuming fund performance of 30%) performance fee income f $120,000 ($2 million AUM x 30% performance = $600,000 x 20%). If you had $5 million nder management, you would have combined fee income of $350,000. If you had $1 billion UM, you would have $60 million in combined fees (assuming fund performance of 20%). Forex Fund Risks. Funds are not for the thin skinned; there are many real risks. In this era f global mood swings, all bets are off. Money invested in a forex fund must truly be discretionary. A fund is only as good as its advisers, so the human risk is significant. Greed and ego often trump integrity and ethics. Due Diligence. In 2008, there is also a noticeable trend toward increased review of funds by nvestors and counterparties (e. g., prime brokers, fund administrators, and auditors). Fiduciaries have a duty to perform due diligence to ensure that a fund's investment decisions are sound and compatible with their client's risk profiles.

Prospects may submit a due diligence checklist to management, requesting extensive information covering every major aspect of the fund's organization, operation and management. Prospects may seek meetings with the officers of the fund and other persons significantly involved in the fund's business. How does a forex fund work? A forex fund requires infrastructure in the form of corporate entities. In the United Sates, we use a limited partnership as the fund and use an S corporation (or LLC) as the general partner (and forex adviser to) of the limited partnership. When set up outside the United States, both the forex fund and its advisor are set up as corporations in a low or zero tax country or other jurisdiction. Managed Accounts. A CTA (commodity trading adviser) manages individual accounts, while a CPO (commodity pool operator) manages a fund (also called a "pool"). In our experience, many people lose interest in a managed account business when they experience the administrative hassles of managing separate accounts.

However, some choose to be both. Advertising and Attracting Investors. Unless listed on a recognized securities exchange, a forex fund cannot advertise to solicit new investors in the fund. A forex trader managing accounts, however, can advertise his or her managed account services. A few countries have rules similar to those of the United States in this regard. Prospective investors in the fund like to see that you have invested your own capital in the fund. It is also a good idea to show prospects that you take fees subject to a hurdle rate, which means that you earn fees only when trading profits exceed a minimum percentage. An investor in a forex fund should be sophisticated enough to understand the risks associated with forex trading. Many investors would be interested in forex funds if they had the opportunity. Because advertising of the fund and any other non-personal communications are prohibited, and the media has touted the risks over the benefits, investors must be sought in more direct and creative ways. A trader may find that in addition to family and close friends, many colleagues and casual acquaintances may be potential investors. If you are interested in getting investors for your fund, your selling efforts must be personally directed toward investors who are known to you. Advertising and any other non-personal communications are prohibited. For the forex trader who wants to trade for his family and friends, this is obviously no problem at all. Since the forex fund is an ideal vehicle to pool the resources of a small group of investors, forex funds can be especially appealing. How do I set up a forex fund?

In 2008, forex traders remain positioned to launch a forex fund quickly without much red tape. In short, starting a forex fund means hiring a legal adviser with the proper expertise to prepare the required documents and provide you with tax and regulatory advice. You will have to work closely with your lawyer to prepare the private placement memorandum (PPM), fund's limited partnership agreement, and subscription agreement. A forex fund can be developed and launched within 2 weeks (on an expedited basis) but the normal development time is about 4 weeks. Offshore funds, while they can be incorporated quickly, take a little longer to establish due to the time required to open a bank and brokerage account for the fund. Favorable Tax Treatment. There are two ways to trade foreign currencies and they have different tax rates. “Foreign currency contracts" are taxed by Internal Revenue Code Section 988. Currency futures, otherwise known as “regulated futures contracts” are taxed under Section 1256. Forward contracts and over-the-counter options in other traded currencies for which there is also trading in regulated futures qualify as "Section 1256 contracts." Gains from futures trading are taxed at a blended rate of 60% long-term gains and 40% short-term gains (regardless of how long a position is held). This 6040 split gives futures traders an advantage over forex traders. While the long-term rate is capped at 15%, the short-term (or “ordinary”) rate can go as high as 35%. The maximum blended 6040 rate is 23%. Forex gains are taxed at the short-term (“ordinary”) rates. Forex traders do not necessarily have to live with the higher "ordinary income" tax rates as they can “elect out” of ordinary income tax rates. Traders who do this will have their currency positions treated as Section 1256 contracts, and their gains will be taxed at the blended 6040 rate. In addition, the fund will most likely qualify as a "trader in commodities" so that investors are able to deduct the fund's expenses.

Securities Act of 1933. Forex funds are private and are not required to report returns, unlike mutual funds that are publicly traded and post their net asset values daily. In the United States, private (hedge) funds are unregistered securities offered as a private placement under the Securities Act of 1933. Also, in the United States, a forex fund is a Regulation D (Rule 506) offering in that it is an unregistered security offered as a private placement. Regulation D provides a safe harbor that exempts the private offering from compliance with the registration and prospectus delivery requirements of U. S. securities laws. However, Regulation D does not exempt an offering from compliance with the anti-fraud provisions of the law. You must supply all investors in your fund with offering documents (also called "disclosure documents") disclosing comprehensive information about the fund. Commodity Exchange Act. The Commodity Exchange Act (CEA) gives the Commodity Futures Trading Commission (CFTC) limited anti-fraud and anti-manipulation jurisdiction over off-exchange (also called over-the-counter or OTC) foreign currency futures and options transactions. "Forex transactions" are leveraged off-exchange foreign currency transactions where one party is a customer. The term does not include transactions that result in actual delivery within two days or that create an enforceable obligation to deliver between parties who are capable of making and taking delivery for business purposes. Must I register with the CFTC? If you plan to trade currency futures contracts, currency futures options, or forward contracts, your fund must be approved by the CFTC.

In addition, you must register with the National Futures Association (NFA) and become a CPO. The CEA defines a commodity pool as an "investment trust, syndicate or similar form of enterprise operated for the purpose of trading commodity interests." CFTC Exempt. A person who operates a commodity pool must register as a CPO unless an exemption applies. If you operate a pool that limits its trading solely to forex and only trades with authorized counterparties, it is not required to register as a CPO, but may do so voluntarily. Forex managed account managers are generally not required to register with the CFTC or become Members of NFA. Understand that any NFA Member forex dealer that services your customer accounts, or you introduce accounts to, is subject to NFA enforcement action for your conduct should your conduct violate NFA requirements. Violations can mean disciplinary action against your dealer even if it acts diligently and has no knowledge of your conduct. As a result, there is a trend among forex dealers to require NFA registration of forex traders managing customer accounts (including a fund). NFA compliance rules address the general issues of following just and equitable principles of trade and avoiding fraudulent behaviors. Commodity Pools. If your forex fund trades in commodity futures or interests, it is also a commodity pool and you are a CPO. Any person who is involved with the commodity pool must register as an associate of the CPO. A registered CPO is required to provide a detailed disclosure statement (the prospectus) to prospective participants in the pool.

Your Disclosure Document must also be filed with the NFA at least 21 days prior to the delivery of the documents to a prospective participant and updated often. There are exemptions from the CPO registration requirements. Investment Adviser Registration. If you plan to execute more than an occasional equity trade in your forex fund, you might also have to register as an investment adviser. If you manage less than $30 million, you are not eligible to register with the SEC (unless you are based outside the United States or you are based in Wyoming) but are subject to applicable state law. Each state has its own registration requirements. Offering Documents . Investors in your fund must receive all material information about the offering and the offering documents should be provided to all investors. Any investor who is not an accredited investor must have sufficient knowledge and experience in financial and business matters to be able to evaluate the merits and risks of your hedge fund. Since the PPM usually is the starting point for those conducting due diligence, it remains a crucial document. Accredited Investors .

Regulation D limits the number of non-accredited investors to 35. Generally, accredited investors includes persons whose net worth (or joint net worth with that person's spouse) exceeds $1,000,000, or whose income was in excess of $200,000 in each of the two preceding years (or, together with that person's spouse, in excess of $300,000 in each of the two preceding years) and who reasonably expect to reach the same level of income in the current year. There are numerous other categories of accredited investors. Performance-based Compensation. Performance-based compensation for fund advisers are paid as an allocation of profits, typically 20%, associated with the growth of the fund. There are state regulations regarding performance based fees and these regulations vary considerably. In some instances, the compensation agreement specifies that funds be only paid when the profits of the fund exceed a hurdle rate. Blue Sky . Within 15 days of the first sale of your offering, an SEC Form D Notice of Sale must be filed with the SEC. Your fund must also comply with state blue-sky laws. In most states, Form U-2 must be filed. Conclusion. Forex funds are about making money and running a forex fund is a great way to do so. The desire to pool assets in a way that is proper, both from a business and a legal standpoint, has led many forex traders to start their own forex funds. For a successful forex trader, a forexfund is an efficient, legal, and professional way to trade your own money along with the moneyof those who want to benefit from your expertise. No longer just for the elite, forex funds willcontinue to grow in varying financial conditions because of their complete market freedom.

The private investment fund industry has years of success ahead of it. Talented forex traders will find profitable outlets for their skills, regardless of government regulation. Forex funds are about making money and running a forex fund is a great way to do so. About Hannah Terhune Ms. Terhune has nearly twenty years of solid experience working closely with people and businesses as an international tax and investment law (private investment fund) attorney. Her prior professional experience includes working as a tax law expert with two of the largest accounting firms in the world and with the United States Tax Court. She has an advanced law degree in taxation from The New York University School of Law (Legum Magister 1991) and a law degree from George Mason University (Juris Doctor 1989). She has served as an Associate Lecturer in taxation and business at George Mason University in Virginia and at Catholic University in Washington, DC. Her prior military service includes serving as Judge Advocate and Aide-de-Camp in the U. S. Army Special Forces. Ms. Terhune has written over 100 published articles and white papers on U. S. and offshore tax planning and private investment funds (hedge funds). [email protected] com. By Hannah M. Terhune, Capital Management Services Group. 7 Hedge Fund Manager Startup Tips. Hedge funds can be mentioned over 1,000 times a day in blogs, newspapers, magazines and on radio stations. At the end of 2011, there were over 9,000 hedge funds in existence with 1,113 starting that year, according to Hedge Fund Research.

In this article, we'll explore the reasons why these funds continue to be popular and what you should take into consideration before starting up your own hedge fund. SEE: A Brief History Of The Hedge Fund Why Start a Hedge Fund? There are many reasons why starting a hedge fund is the new American dream. Here are some of the most popular: Almost everyone has read the news stories about the few hedge fund managers who have earned over $1 billion a year running their funds. Hedge funds grace the cover of mainstream media newspapers and magazines on an almost-daily basis. The secretive and exclusive nature of hedge funds has a draw, compared to many other areas of finance and investing, which can at times seem mundane. With a little bit of capital it is relatively easy to start a hedge fund. However, implementing risk controls, growing assets, hiring staff and running the organization as a profitable business, while producing positive performance, is very challenging. Between 4 and 10% of all hedge funds fail or close down each year, and countless others are half-started, abandoned or re-shaped into private investment pools for friends and family. This is not to say that starting a hedge fund is a bad idea, but it is important to realize that it is a very challenging endeavor - one that must be approached with the same long-term perspective required for running a business. Tips for Hedge Fund Startups If you are set on starting a hedge fund, there are dozens of factors that will determine your success. Here are seven tips or crucial areas of your new venture that you should be cognizant of and think through, before showing any potential investors or partners your business plan for your fund. 1. Competitive Advantage Your hedge fund must have a competitive advantage over others in the market.

This may be a marketing advantage, information advantage, trading advantage or resource advantage. A marketing advantage could be close career-long relationships with hundreds of high net worth investors or family offices. An example of a resource advantage would be if you work for a large asset-management firm that would like to heavily invest in launching a hedge fund. 2. Strategy Definition Some hedge fund startups underestimate the importance of clearly defining their fund's investment strategy. What is your strategy, and how will you define and explain your investment process to your own team and initial investors? Developing a repeatable, defendable, profitable investment process after taking the costs of running a hedge fund into consideration can be difficult. Ideas which have not been tested (or have been only backtested) in the real markets don't hold very much water with investors and consultants, who see hundreds of wannabe hedge fund managers a year. It will help to do some hedge fund performance research if you haven't already and know which strategies are currently doing well, which are not and why this may be the case. Are you launching your fund at a time when your strategy is in very high demand, or has the pendulum swung the other way for the time being? Start building a list of the other hedge funds that run the same strategy as your firm and conduct as much competitive intelligence on them as you are able to, ethically and legally. 3. Capitalization and Seed Capital It is important that your new hedge fund be well capitalized. The amount of assets your fund will need to manage to become profitable will depend on three things: Team size Investment partners Unique cost structure. Some hedge fund managers claim profitability with less than $10 million in assets under management, while others claim that you must manage $110 million to $125 million in assets to be considered a serious business venture with some long-term prospects for survival.

The number is probably somewhere in the middle, but everyone's business is unique and due to performance fees, you can sometimes see large profits with relatively low asset levels. 4. Marketing and Sales Plan Like any business, nothing happens until a sale is made. It is important to develop a sales plan for raising assets before you open your doors for business. One of the first steps in doing so will be deciding where you will try to raise assets. There are many potential sources of investors, including: Seed-capital providers Family and friends High net-worth individuals Financial advisors Wealth-management offices and RIAs Single - and multi-family offices Fund of hedge funds Corporations Foundations and endowments Pensions Sub-advisory relationships. Small hedge fund startups typically try to develop long-term relationships with seed capital providers, family and friends and high net worth individuals (directly or through their financial advisors). Working with institutional-quality investors who might eventually invest $25 million to $100 million at a time can be difficult until you have a two-to-three year track record and well over $100 million in total assets under management. Some simple marketing and sales activities to complete and create before launching your fund include: Newsletters Website Two-page marketing piece 20-page PowerPoint presentation Professional logo Letterhead Business cards Folders with logos for presentations. Many of these are Business 101-type details, but they are often overlooked or poorly executed. Anyone who can really help your business grow sees hundreds, if not thousands, of hedge fund managers a year, and it is easy for them to see which managers have invested their time and effort and which have thrown something together at the last minute. All marketing and sales materials should be produced under the direction of your chief compliance officer or compliance consultant, as there are many limitations and details that need to be approved and reviewed. 5. Risk Management Risk management is an important piece of the puzzle when running a successful hedge fund. Your firm must come up with a concrete and competitive method for managing both business and portfolio risk or you will come off as not being serious about your business or long-term growth goals.

There are many consultants and consulting firms that do nothing but advise hedge funds on portfolio and operational risk-management issues. 6. Compliance and Legal Assistance Hiring great legal counsel should be seen as an investment. An experienced hedge fund lawyer can help you avoid pitfalls and build relationships and invite you to networking events such as private-capital introduction dinners. It will also show others in the industry that you are investing in your own business because you aim to be in the industry for the long haul. 7. Deciding on Prime Brokerage Many startup hedge fund managers underestimate the importance of choosing a prime brokerage firm, which can act as a partner to their business. The prime broker is such an integral part of how your hedge fund will trade and operate that you should take several weeks or months to evaluate your options and weigh the costs and benefits of doing business with the various firms you meet with. It is usually wise to choose a prime brokerage team that is very motivated to serve your needs, but not so small that they physically cannot meet all of your trading and prime brokerage requirements. While capital-introduction services can be a great thing for your prime broker to offer, know that they often require a nine - to 12-month track record at a minimum before they can do much for you beyond helping explore seed capital sources. Once your team has proven itself, a good prime broker will help make introductions if you have great performance and a solid team behind the portfolio. The Bottom Line Starting a hedge fund is a challenging endeavor that takes a multi-year commitment to refining your strategy, building a team, and finding both trading and marketing niches where your firm can profitably operate. While many hedge funds fail before they become large enough to be viable businesses, following the tips above will help save you time and gain some early momentum in marketing your portfolio. Starting Your Own Forex Brokerage? 3 Things to Consider.

The Dot-com boom has brought us accessible information, opportunities to voice opinions and a channel to create aspiring online businesses with a global audience. Among the businesses that have boomed as a result of the Internet and globalization are Forex brokers. A forex brokerage is an entity that connects retail forex traders (i. e. individuals that trade on the foreign exchange market) with the forex market. The forex market is traded on the “interbank” which is a fancy way of saying banks trade electronically with each other at various prices that vary from bank to bank. The growth of forex brokerages can be attributed to the fact that, now more than ever; people wish to make money from home rather than going to work and putting money into someone else’s pocket. Among these people are Forex traders – people that predict the price movements of various currencies from around the world in order to make a profit. To do this, they need Forex brokers; so, the more “home traders” there are, the more Forex brokers will increase. Entering the Forex Brokerage Industry. Today, the sheer number and availability of online Forex brokers is staggering.

You do not need to conduct major research to find one. Unfortunately, with this increase, a lot of unreliable forex brokers slide into the market and make promises they cannot keep (i. e. the promises of making money, low spreads or the most user-friendly trading platform available). Therefore, many new traders get sucked in, and in the long run they burn out all of their trading capital and leave the broker. Clients (i. e. traders) need reliable forex brokerage services; and those that don’t have one will lose out every time. If starting a forex brokerage business is truly a passion, then here are three factors that should to be considered to become, and remain, competitive. 1. Don’t over-make your market. Forex brokers get their spread cost between two currencies (i. e. EURUSD) from the Interbank market. The Interbank market is simply a collection of major banks, hedge funds and financial institutions that are legally obliged to serve commercial turnover of currency investments as well as a large amount of speculative, short-term currency trading. For example, if the Interbank market charges 1 pip on EURUSD, a large volume of Forex brokers mark this up to around 3 pips. This means that they make a profit of 2 pips on every trade for this currency. In essence, they are making their own market by over-charging their customers. This is a certain recipe for disaster as this makes Forex trading expensive. There isn’t anything wrong with marking up the Interbank market price, but the advice simply is – don’t over-do it. There are thousands of other brokers out there who will gladly take your customers by simply quoting a cheaper spread. This is especially relevant to the six most traded currencies. The last triennial central bank survey lists them in the following order: 1) US Dollar 2) Euro 3) Japanese Yen 4) Great British Pound 5) Australian Dollar 6) Swiss Franc.

Keep in mind, the US Dollar contributes around 85% to daily trading so this should be the primary currency to consider when making the market (i. e. devising a price for the customer). 2. Offer low or no commission. A commission is simply a fee that customers are charged when placing a trade (a buy or a sell). This commission can vary depending on the currency pair traded. The aim is to make Forex trading as cheap as possible for the customer. Low spreads and no commission are exactly the type of trading they like and it is up to you to provide it. Believe it or not, some forex brokers lie. They claim their trading is commission free, but all they do is pump up the spread cost so customers never receive the benefit. To accompany low spreads, low commission can work absolute wonders for Forex brokers. The absolute worst thing you could do is to promise this, but fake it by pumping up the spread costs. This means the Forex brokerage owners do not want to wait and rely on volume of traders so they acquire as much as they can by faking it and overcharge them straight away. Unfortunately, a lot of brokers do this and end up losing customers. 3. Ensure world class support. Alarm bells start ringing if customers have trouble undertaking standard activities such as withdrawing funds or simply being avoided when asking support questions about a forex brokerage trading platform.

To stay competitive, and in-tune with customers, support must be high quality and responsive. For instance, if a customer asks a question about your platform’s usage, support must provide specific instructions on how to resolve the issue. Also, withdrawing funds should be a seamless process that does not take more than 2 days to process. It is small factors such as this that will eliminate any doubts in the customers’ mind about your services. Dragan Lukic is a professional trader and a trading educator. He has years of experience in working with Forex brokers and has helped people from around the world get started in this industry. Forex trading is his passion which he educates through his company – Capital Forex Training. Guide to Starting a CTA – Commodity Trading Advisors. Futures and forex traders that have developed trading strategies suitable for outside clients may be candidates to develop a successful commodity advisory business focused on trading futures, forex, or swaps.

Although many effective traders do not have a large network of investor contacts and may not have the skill-set to solicit investor capital, many successful managed account businesses are built around a partnership of individuals that can collectively commit the attributes needed to realize success. This article covers the major considerations in the process to launch a commodity trading advisor (“CTA”) , a term that refers to an advisory firm that manages client assets in trading strategies focused on futures (including commodity futures, index futures, rate futures, and others), over-the-counter foreign currencies (known as “forex”), swaps, commodity and leveraged ETFs, and other derivatives regulated by the Commodity Futures Trading Commission (“CFTC”). Overview – Process to Start a CTA. The process to start a CTA is reasonably straightforward and can be accomplished in a matter of weeks with the assistance of experienced counsel. Although the process can vary somewhat depending on the specific circumstances of the manager, the process to start a CTA generally involves: refining trading strategies and systems forming the entity that will serve as the CTA firm (generally an LLC or corporate entity formed in the manager’s home state) taking necessary examinations and filing a registration application with the CFTC (unless an exemption is available) filing a membership application with the National Futures Association (“NFA”) for both the CTA firm and its Principals developing a customer account agreement and risk disclosure document (which must be approved for use by NFA in the case of registered CTAs) creating compelling marketing communication materials (such as a “pitchbook” and “tear sheet”) to market the CTA client offering opening bank and brokerage accounts for the CTA firm to process advisory fees and expenses developing a coherent marketing strategy to convey the trader’s edge and competitive position soliciting prospective clients and executing customer agreements implementing the investment strategy across “live” client accounts. Additionally, registered CTAs will need to develop a robust compliance program to avoid costly and unwanted regulatory entanglement. Contact us today to schedule a complimentary consultation . We can answer any questions that you may have and provide details regarding the timeline and costs to launch a CTA firm. Most futures and forex traders will need to register with the Commodity Futures Trading Commission and will be required to become members of the NFA prior to managing client accounts for compensation. Generally, the only exemption available to traders that exercise discretionary authority over client accounts requires that the firm have not more than 15 clients in any 12-month period and not hold itself out to the public generally as a commodity trading advisor. “Holding out to the public as a CTA” is a potentially very low standard of conduct which is likely to include any active solicitation activity directed at any prospective investors other than close friends and family.

Traders that do not exercise discretionary authority over clients’ accounts and only publish their trading ideas in a newsletter format can generally avoid CTA registration, as well. The principals of a registered CTA who are involved in client solicitation activities will be required to take and pass the Series 3 examination. The Series 34 examination will also be necessary if the CTA trades forex for client accounts. As with many asset management businesses, the biggest challenge is usually generating interest from prospective clients and aggregating enough assets to make the business viable. Although consistently delivering above-market returns and developing a track record with an attractive risk-reward profile is a significant hurdle, the competition for investor dollars is intense, and having success from a capital raising perspective requires a diligent effort. Registered CTAs must craft solicitation material carefully to meet NFA’s guidelines or risk sanctions. However, despite NFA’s specific rules, startup CTAs can use hypothetical or back-tested performance results in marketing materials. CTAs can use third-party referral sources, however, for registered CTAs these third-party solicitors will generally need to be licensed as Associated Persons of the CTA. Associated Persons must comply with the examination requirement in the same way as employees of the CTA that conduct solicitation activities. Other Issues Related to Launching a CTA. CTAs can offer multiple trading programs to prospective clients through the same CTA firm and generally under the same managed account agreement. While it is important that clients receive appropriate disclosure regarding the programs that they select. A CTA that trades any securities for client accounts may have to register as an investment advisor depending on where the CTA firm is based and other factors.

Exemptions from registration are available in certain states, but most states will require registration as an investment advisor prior to a CTA managing client assets in strategies that involve the trading of any securities. Launch a Commodity Trading Advisor – Let’s Get Started. If you’re ready to begin the process to start a CTA, please contact us to schedule a complimentary consultation to answer any questions that you may have and to learn more about the timeline and costs to launch a CTA firm. What Are the Steps Required to Set Up a Forex Hedge Fund? February 2011 | Forex Traders. Trading currencies has become a very popular investment activity over the past few years. Many have determined that the medium is either too high risk or too stressful for their tastes, but a relative few have invested the time required to learn the craft, have felt a personality match with the rigorous trading regimen, and have achieved a level of success and consistency over time. As the word has gotten out regarding their prowess, friends have come forward with funds to add to the pool. Success breeds growth, but at some juncture in the timeline, the successful trader may soon want to formalise the informal arrangements at hand. The entrepreneurial spirit takes many forms in our culture, and the financial services industry is not an exception to the rule. At last count, some 10,000 estimated hedge funds populate the planet, with a subset of those devoted specifically to forex trading.

To form a hedge fund, you will encounter many regulatory obstacles, but their intent is to protect investors, not block the path of an aspiring forex trader. Experts have written many pieces on this topic of a highly technical nature, but from the outset, the following checklist can be used as a guide for future areas of effort: Self Evaluation: Before getting too deep in the process, it is time to look in the mirror. Is forex trading the career that you envision for yourself? Are you committed to the craft and confident in your abilities to take on all the challenges that will be required? Once you begin accepting funds from other individuals, many of who will not be friends or friendly, are you prepared to deal with the customer service aspects of managing money in both the good times and the bad times? Positive answers are required, without hesitation; Compensation: As others will advise, it cannot only be about the money. You have to enjoy what you are doing, but the compensation aspects will provide a nice incentive. Typically, fee arrangements are in the 1% to 2% range with a 20% performance allocation on all returns. State laws may also require 'hurdle rates' (no compensation below a specified return), or you might consider them as a good marketing tool. For $2 million under management and a 30% return, you might expect fees of $140,000 for a year worth of effort; Specialised Attorney: An attorney experienced with the entire process can only address much of the regulatory 'tip toeing'. A Private Placement Memorandum will be required to solicit customer deposits. There are specific SEC and state laws that must be followed in this area, and may restrict the number and type of client that you approach. The type of legal entity required will require additional effort and decisions; Certifications and Registrations: The Commodities Futures Trading Commission and the National Futures Association will require certifications and registrations related to investment advice, management, and pooling arrangements.

Do you want to offer a managed forex account or a forex investment pool? Your attorney will help you in these areas also; Tax Issues: Depending on how you trade and in which markets, the tax laws will treat your earnings differently. Consult a CPA in this area for specific guidance; Lastly, be sure you have the financial net worth to support starting a new business on your own, capable of withstanding the bad times as well as the good. Starting a forex fund can be a daunting task, but many have succeeded in the effort. Perhaps, you are next in line. Guest contribution provided by Forex Traders. We provide Turnkey solutions for. Setup Forex Brokerage. YourOwnBrokerage is working with companies such as TopFX, ADS & Integral, and to create the most competitive Retail Forex business in the world. We couple the award winning Trading Platform and our own innovative technology to start organizations off with the right foundation needed to succeed in retail forex industry. We have assisted numerous Forex fund managers in exploring the various ways to trade forex funds professionally and legally, including through dedicated forex funds and offshore onshore structures. Our hedge funds startup services are designed to be comprehensive, streamlined, and cost-effective. Setup Payment Company. Our extensive knowledge of the payment processing business, as well as industry contacts, enables us to provide clients with insights on industry trends and current marketbusiness practices. Each client relationship is approached on an individualized basis and their expressed preferences. Our Products.

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Repidly establish a successful Binary Options brand. Binary Options Software Capabilities. Web based Binary Options Platform Android & iPhone Binary Platform. High Low Touch No Touch Turbo Short & Long Terms. Forex Commodities Gold & Silver Indices. Start your own Forex Hedge Funds. We have assisted numerous Forex fund managers in exploring the various ways to trade forex funds professionally and legally, including through dedicated forex funds and offshoreonshore structures. Our startup services are designed to be comprehensive, streamlined, and cost-effective. We routinely assist startup funds with respect to: Offshore Onshore Hedge Fund Formation Formed as a Professional Closed-end Fund Appointing Authorized Fund Managers Establishing Liquidity Setups Creating Hedge Funds Website Creating Marketing Campaigns. Transparent Regulation & License Consulting. With YourOwnBrokerage, you have a whole team of experts backing you up so you can successfully acquire your business license. We will explain the necessary regulatory requirements, assist you in drafting your business plans and manuals, properly follow the entire process, and engage in the necessary tasks for you to operate your business legitimately. Licensing Jurisdictions.

Forex Brokerage License. Belize BVI Panama Seychelles Mauritius United Kingdom Cyprus Malta Australia New Zealand Vanuatu. Payment Processing License. United States Panama Hong Kong Belize United Kingdom Czech Republic Singapore. Free Webinar – Hong Kong Company Incorporation, Maintenance & Liquidation. Welcome to the beta launch of our new website! Fully functional Payment Processor for Sale. YourOwnBrokerage is a global Technology & Business Consulting firm with a specialized focus in financial services industry. In particular, it is one of the world’s leading offshore outsourcing company focused in the capital markets, Payment industry and forex industry space, RISK WARNING: Forex and CFDs are leveraged products. Trading in these products is highly speculative in nature and carries a significant level of risk which may not be suitable for all investors. Please ensure you fully understand the risks involved and only invest money you can afford to lose. Seek advice from an independent adviser if at all unsure as to the suitability of investing in such instruments. 6 Points to Consider Before Starting Your Own Forex Brokerage. - Hybrid model: This is where the brokerage runs a combination of the Market Maker and Agency models based on a certain set of risk criteria.

You will want to find a counterparty technology partner who is flexible enough and has a structure in place that is adaptable to any business model that the retail brokerage would implement. Another thing you will want to be sure of is that your setup supports flexible Introducing Broker (IB) and Money Manager infrastructures that include the necessary trading and reporting tools. The IB and money management programs are typically primary catalysts for boosting your transaction volume. . The IB model is the most common model used as the broker benefits from the business introduced by the IBs and in return the IBs receive rebates based on the trading volume of the introduced clients. Guide to Starting a CTA – Commodity Trading Advisors. Futures and forex traders that have developed trading strategies suitable for outside clients may be candidates to develop a successful commodity advisory business focused on trading futures, forex, or swaps. Although many effective traders do not have a large network of investor contacts and may not have the skill-set to solicit investor capital, many successful managed account businesses are built around a partnership of individuals that can collectively commit the attributes needed to realize success. This article covers the major considerations in the process to launch a commodity trading advisor (“CTA”) , a term that refers to an advisory firm that manages client assets in trading strategies focused on futures (including commodity futures, index futures, rate futures, and others), over-the-counter foreign currencies (known as “forex”), swaps, commodity and leveraged ETFs, and other derivatives regulated by the Commodity Futures Trading Commission (“CFTC”). Overview – Process to Start a CTA. The process to start a CTA is reasonably straightforward and can be accomplished in a matter of weeks with the assistance of experienced counsel. Although the process can vary somewhat depending on the specific circumstances of the manager, the process to start a CTA generally involves: refining trading strategies and systems forming the entity that will serve as the CTA firm (generally an LLC or corporate entity formed in the manager’s home state) taking necessary examinations and filing a registration application with the CFTC (unless an exemption is available) filing a membership application with the National Futures Association (“NFA”) for both the CTA firm and its Principals developing a customer account agreement and risk disclosure document (which must be approved for use by NFA in the case of registered CTAs) creating compelling marketing communication materials (such as a “pitchbook” and “tear sheet”) to market the CTA client offering opening bank and brokerage accounts for the CTA firm to process advisory fees and expenses developing a coherent marketing strategy to convey the trader’s edge and competitive position soliciting prospective clients and executing customer agreements implementing the investment strategy across “live” client accounts. Additionally, registered CTAs will need to develop a robust compliance program to avoid costly and unwanted regulatory entanglement. Contact us today to schedule a complimentary consultation .

We can answer any questions that you may have and provide details regarding the timeline and costs to launch a CTA firm. Most futures and forex traders will need to register with the Commodity Futures Trading Commission and will be required to become members of the NFA prior to managing client accounts for compensation. Generally, the only exemption available to traders that exercise discretionary authority over client accounts requires that the firm have not more than 15 clients in any 12-month period and not hold itself out to the public generally as a commodity trading advisor. “Holding out to the public as a CTA” is a potentially very low standard of conduct which is likely to include any active solicitation activity directed at any prospective investors other than close friends and family. Traders that do not exercise discretionary authority over clients’ accounts and only publish their trading ideas in a newsletter format can generally avoid CTA registration, as well. The principals of a registered CTA who are involved in client solicitation activities will be required to take and pass the Series 3 examination. The Series 34 examination will also be necessary if the CTA trades forex for client accounts. As with many asset management businesses, the biggest challenge is usually generating interest from prospective clients and aggregating enough assets to make the business viable. Although consistently delivering above-market returns and developing a track record with an attractive risk-reward profile is a significant hurdle, the competition for investor dollars is intense, and having success from a capital raising perspective requires a diligent effort. Registered CTAs must craft solicitation material carefully to meet NFA’s guidelines or risk sanctions.

However, despite NFA’s specific rules, startup CTAs can use hypothetical or back-tested performance results in marketing materials. CTAs can use third-party referral sources, however, for registered CTAs these third-party solicitors will generally need to be licensed as Associated Persons of the CTA. Associated Persons must comply with the examination requirement in the same way as employees of the CTA that conduct solicitation activities. Other Issues Related to Launching a CTA. CTAs can offer multiple trading programs to prospective clients through the same CTA firm and generally under the same managed account agreement. While it is important that clients receive appropriate disclosure regarding the programs that they select. A CTA that trades any securities for client accounts may have to register as an investment advisor depending on where the CTA firm is based and other factors. Exemptions from registration are available in certain states, but most states will require registration as an investment advisor prior to a CTA managing client assets in strategies that involve the trading of any securities. Launch a Commodity Trading Advisor – Let’s Get Started. If you’re ready to begin the process to start a CTA, please contact us to schedule a complimentary consultation to answer any questions that you may have and to learn more about the timeline and costs to launch a CTA firm. How to start your own brokerage. Congratulations! You’ve decided to start your own brokerage. Perhaps you’ve heard about the massive amounts of money to be made and want to jump in on the action or perhaps it has been your longtime dream to own a financial brokerage.

Whatever the reason might be, you have decided to open a Forex brokerage and are on the path to entrepreneurship heaven (or hell, depending on how well you plan your strategy). As an expert in the field of brokerage start-ups and having assisted brokerages across the globe in successfully launching their own Forex brokerage, we’ve summarized the steps you’ll need to follow in order to start your own brokerage and undertake trading bliss: Research: Do your homework and determine what your target market will be. Forex licensing and regulation requirements are determined by the specific country in which you will be actively seeking traders. Gather initial capital. As a Forex brokerage, you’ll have two types of expenses, operating and trading expenses. In some locales, a minimum capital requirement has already been codified for Forex businesses who are either based locally, or who are actively seeking clients living in the jurisdiction. Regardless of capital requirements set by jurisdictions, a brokerage should plan to have significant funds set aside to cover ongoing costs during the first couple of months of operations. Operating funds and trading funds must be segregated. Before you even open your brokerage, you need to incorporate. Once you are incorporated, you’ll need to become a licensed and registered broker. Some locations, such as Cyprus, Belize, the British Virgin Islands, the Cayman Islands, Jersey, Luxembourg, and Panama, cater to newly incorporated brokerages. Cyprus is extremely popular since registering there, provides brokerages access to clients residing in any of the countries belonging to the European Union. Set up contracts with Payment Service Providers. It is advisable to have more than one PSP available in the event your primary PSP shuts you down, you’ll have a backup one already in place. Set up your office: This includes things like your physical space requirements (real estate, phone lines, electric, internet, etc), evaluating, acquiring and setting up a trading platform, choosing your strategy (A Book or B Book), creating a website and collateral, hiring staff, designing an administrative system, creating a sales strategy, etc. Training and testing: Once you are set up, it’s time for training and testing.

Test your platform and train your sales team before you go live. Launch your initial marketing campaigns and start trading with a small group of clients as a test. Show Time: Once you feel confident in your systems and your staff, move forward with your full-scale marketing campaigns to acquire clients. Once you begin the client acquisition process, assess the development of your lead generation, conversion and retention efforts, monitor your profitability and look for growth opportunities, including a new mix of products Get the 5 most predictable currency pairs. Yael Warman is a creative writer with a strong background in marketing and advertising. Yael has been a writer for over 10 years and has worked for clients in various industries as well as her own companies and is currently the Content Manager at Leverate.



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