What is a Tied Agent in the Forex Market and How do I Become a Forex Tied Agent?
In the online forex trading industry, a Tied Agent (often referred to as a TA), is either a business entity or independent referral agent / Introducing Broker that leverages the namesake and banking relationships of a fully licensed forex broker within the European Union. A Tied Agent should not be confused with an FCA Appointed Representative (AR) because the specific rules governing the broker / agent relationship differ based on the regulatory requirements in the UK. Therefore, it’s important to highlight that a Tied Agent only refers to a relationship with FX brokers licensed in the European Union.
In jurisdictions outside continental Europe, similar types of broker / agent relationships exist, however, just like the UK, the rules and guidelines may be slightly different. For example, those looking for a similar type of relationship in Australia have the ability to become an Authorised Representative. Just note, that the specific rules governing this relationship are set by ASIC, the local regulator that oversees forex and CFD trading in Australia. From a general perspective, whether it is an AR in Australia or a Tied Agent in Europe, the concept remains the same.
What Are Some Advantages in Becoming a Forex Tied Agent (TA) in the EU?
There are several reasons why it’s more advantageous to become a forex Tied Agent instead of starting your own forex brokerage. First, some entrepreneurs in the forex space prefer not to take on the added responsibility required to run a fully licensed forex brokerage: locating executive directors, reporting requirements, accounting, and compliance obligations as just a few examples. A Tied Agent happens to be an excellent compromise, allowing entrepreneurs the ability to run as a quasi-regulated brokerage with just a few limitations.
Another reason to consider becoming a forex Tied Agent is the increasing difficulty forex brokers face in obtaining bank accounts. This holds especially true for newly formed, unregulated forex brokers. An advantage in becoming a Tied Agent in the FX market is the ability to leverage the banking relationships of the FX broker sponsoring their business, often referred to as a licensee. By relying on the banking network of the licensee, Tied Agents avoid the many headaches involved in trying to secure a bank account or PSP on their own.
Finally, many of the entrepreneurs that have chosen the Tied Agent route never had plans to become the next Amazon of the forex industry, being quite content to earn commissions or rebates based solely on client referrals. This leads to an important point. It’s often assumed that Introducing Brokers / Referral Agents cannot not earn the same revenue as as those operating their own forex brokerages, an assumption that is untrue.
Although it’s correct that many IBs do earn less in revenue on a per client basis than a fully fledged broker, the operating expenses that an Introducing Broker / affiliate has to manage are far lower when compared to a fully licensed forex brokerage. This important trade-off between overhead and revenue is a factor each new broker must consider. In some cases, a forex Tied Agent is the best compromise between launching your own forex brokerage vs. operating as a referral agent / IB.
How to Become a Tied Agent in the Forex Market?
In order to become a Tied Agent, you should first have an established business in place, or at least the structure. The absolute minimum requirements would be: a forex broker website, company incorporation, bank account for receiving rebates, and a basic business plan. Note that existing Introducing Brokers or affiliates that can demonstrate an established level of business activity in form of client volume and deposits will receive more lucrative proposals than a newly established broker.
If you are just starting starting your own FX brokerage, don’t view the above as a discouragement. Our team at Atomiq Consulting has several brokers in our network willing to partner with your business, even if the firm is a startup. It’s important to understand, though that the initial offering by the licensee may not be as lucrative for startup brokers. With that in mind, we’ll provide the necessary resources to help your new broker both grow and expand over time.
The actual process of becoming a Tied Agent in the forex market is quite simple. Once our team learns a little more about your business plans, we’ll introduce you to several established, EU regulated forex brokerages in our network. After your broker / white label has reviewed the offers and decided upon the best choice, you’ll then begin the KYC process with the FX broker you’ve chosen to partner with. You should expect to provide the sponsor broker (licensee) with basic information about all company directors and shareholders. In addition, the licensee will also ask for a business plan which must includes revenue projections, marketing strategy and intended product offerings. Upon approval by one of the FX brokers in our network, you’ll then be on your way to becoming a forex Tied Agent!
Tradeoffs Worth Considering Before Becoming a Forex Tied Agent in the EU
Because a Tied Agent does not have the same reporting and financial obligations as a regulated broker, it won’t be possible to directly receive client funds, which is one of the compromises that must be considered when becoming a forex tied agent. Bear in mind that there is an upside as it relates to banking. As mentioned earlier, startup forex brokerages are now struggling to obtain bank accounts, especially unregulated firms. Becoming a Tied Agent completely avoids what has become a massive headache for newly formed forex brokerages.
Another trade-off your brokerage must consider is that a Tied Agent cannot generate as much revenue as a fully licensed brokerage and will most likely pay a monthly fee to the sponsor broker (licensee) for the additional compliance and reporting work involved. Before you dismiss the idea of becoming a Tied Agent, it’s important to keep in mind that your brokerage will not be responsible for any of the regulatory, accounting, or additional overhead involved in running a regulated forex brokerage, which in our opinion is a more than fair compromise.
A final tradeoff is that the Tied Agent may be limited in the content they are able to offer both on their website and other promotional material such as brochures, webinars or seminars at financial expos. The reason for this restriction is that the licensee maintains responsibility for the complete regulatory supervision of the Tied Agent. For this reason, all website and marketing verbiage must be approved by the compliance team of the licensee before it can be published and distributed by the Tied Agent.
Atomiq Consulting – Your Partner for Becoming a Forex Tied Agent
If you are interested in establishing a Tied Agent partnership with a regulated forex broker in the European Union, our team of expert consultants are more than happy to assist you every step of the way. With decades of experience in the forex industry and a deep network of forex brokers, liquidity providers, and technology firms, Atomiq Consulting is ideal partner for guidance & consultation on becoming a Tied Agent in the forex market.
To learn more about becoming a forex Tied Agent, discuss the basic costs involved, or simply address any additional questions about launching a forex broker, don’t hesitate to contact Atomiq Consulting today!
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