What is a Tied Agent in the Forex Market?
In the online forex trading industry, a Tied Agent (often referred to as a TA), is either a business entity or independent agent that leverages the namesake and banking relationships of a fully licensed forex broker in the European Union.
A Tied Agent should not be confused with an FCA Appointed Representative (AR) because the specific rules governing each relationship differ based on the local regulatory requirements in the UK. Furthermore, a Tied Agent only refers to a relationship with FX brokers licensed in the European Union.
In jurisdictions outside continental Europe similar relationships exist, however, the rules and guidelines may be different. For example, it’s also possible to become an Authorised Representative in a country like Australia. Just note though, 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 is the same.
What Are Some Advantages in Becoming a Forex Tied Agent (TA) in the EU?
There are a variety of reasons why it may make more sense to become a tied agent over starting your own forex brokerage. First, some entrepreneurs in the forex space prefer not to take on the added responsibility needed to run a fully licensed forex brokerage. The necessary staff members, reporting requirements, accounting, and compliance obligations are often enough overhead to deter one from initially obtaining a forex broker license. A Tied Agent is a compromise over obtaining a forex license, allowing the business to run as a quasi-regulated brokerage with some limitations.
Another reason it makes sense to become a Tied Agent is due to the increasing difficulty new brokers face in obtaining bank accounts, especially offshore forex brokers. A Tied Agent can simply leverage the existing banking relationships of the FX broker sponsoring their business, often referred to as a licensee, thereby avoiding the many headaches involved in trying to secure a bank account.
Finally, some of those that go down the Tied Agent route don’t wish to become the next Amazon of FX and are pleased to earn commissions or rebates based on client referrals only. It’s wrong to assume that operating as an IB or referral agent isn’t as financially lucrative as running an entire FX brokerage. Although it’s true that IBs earn less in revenue on a per client basis than a broker does, the overhead for an IB is much lower. This trade-off, between overhead and revenue, is something each new broker must consider when deciding how they wish to launch and grow their business, which is why a Tied Agent could be a potential compromise of the two.
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 minimum requirements would be as follows: a forex broker website, company incorporation, bank account for receiving rebates, and a basic business plan. Introducing Brokers or affiliates that can demonstrate a certain level of business will have more options and a slightly better proposal from partner firms than a completely new entity. If you are just starting off though, this shouldn’t be a discouragement, as we will know of several brokers willing to partner with your new startup. It’s important to understand though that the revenue may not be as lucrative for those just starting out, however, our consultation team can also help you in expanding your marketing and overall business growth.
The 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 forex brokerages in our network. After your firm 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 licensee partner with basic information about all company directors and shareholders. The licensee will also ask for a business plan which includes revenue projections, marketing strategy and intended product offerings. Upon approval by sponsor FX broker, you are then on your way!
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.
An additional trade-off is that the Tied Agent cannot earn as much in revenue as a fully licensed brokerage and will most likely pay a monthly fee to the sponsor broker for the additional compliance and reporting work involved. It’s important to keep in mind that the Tied Agent is not responsible for any of the regulatory, accounting, or other overhead involved in running a regulated forex brokerage, which in our opinion is a more than fair trade off.
A final compromise 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 sponsor broker (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 becoming a Tied Agent for a regulated forex broker in the European Union, our expert team of consultants are more than happy to further assist you. 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, further explore our network of FX brokers, go over basic costs, or address any additional questions, don’t hesitate to contact Atomiq Consulting today!
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