Hi,
I have gone through most of the posts regarding the legal side of forming a Forex Company in Cyprus. The one thing that perplexes me that most, is the difference in capital requirments. There is the option of 200K Euros for a brokerage firm and the other option for 1million Euros where the only extra licence you get is Dealing on Own Account. You have mentioned that "most" brokerage firms do take the Dealing on Own Account licence even if that means an extra 800K in capital requirments. My question is why do brokerage Firms go for this Dealing on Own Account option? What does it allow them to do that justifys the lock up of an additional 800K Euros, which otherwise can be invested in more productive activities (from the 1Million Euro Capital requirments I think firms are required to maintain at least 92% in cash at all times!)
Dealing on Own Account is the ability to basicly do prop trading - trade with the companies funds! I do not see how is this connected to accepting clients money and allowing them to trade forex with you? Is it becouse Dealing on Own Account allows the firm to take the other side of the clients trade? Be a Market Maker? why Dealing on Own Account is so important and what does it mean in the context of a Forex company?
I would appreciate your answer as this is the one thing remaining to clarify before we consider Cyprus.
Thank you
I have gone through most of the posts regarding the legal side of forming a Forex Company in Cyprus. The one thing that perplexes me that most, is the difference in capital requirments. There is the option of 200K Euros for a brokerage firm and the other option for 1million Euros where the only extra licence you get is Dealing on Own Account. You have mentioned that "most" brokerage firms do take the Dealing on Own Account licence even if that means an extra 800K in capital requirments. My question is why do brokerage Firms go for this Dealing on Own Account option? What does it allow them to do that justifys the lock up of an additional 800K Euros, which otherwise can be invested in more productive activities (from the 1Million Euro Capital requirments I think firms are required to maintain at least 92% in cash at all times!)
Dealing on Own Account is the ability to basicly do prop trading - trade with the companies funds! I do not see how is this connected to accepting clients money and allowing them to trade forex with you? Is it becouse Dealing on Own Account allows the firm to take the other side of the clients trade? Be a Market Maker? why Dealing on Own Account is so important and what does it mean in the context of a Forex company?
I would appreciate your answer as this is the one thing remaining to clarify before we consider Cyprus.
Thank you
