Binary Options Brokerage – Business Plan

-Amit Yashaswi
-Chetan Bandodkar

Regulations
Trading on binary options is illegal in India as per the guidelines issued by RBI and FEMA.

Binary options are not regulated in India and due to lack of regulations the offshore binary
Brokers can provide their service in India via its online portals.

A Binary option broker must acquire licensing in order to establish transparency and insure
credibility than non-regulated Brokerage as these brokerages do not operate under strict
regulations .Depending on the jurisdiction and laws, regulations differ regarding the licensing of
Forex and Binary options Brokerages.

Advantages of Licensing

 Transparency
 Safety
 Higher credibility
 Dispute center

CYSEC
Most countries have their own binary option licensing body to the brokers operating in their
countries. Some European union countries accept regulations by other countries. The most
powerful and influential regulatory body in EU is CySEC(The Cyprus Securities and Exchange
Commission), which is located in Cyprus. Due to the lower taxes their brokers enjoy many
benefits. Any broker registered with CySEC undergoes complicated procedures and frequent
checks in order to be licensed. They often issue warnings to brokers that do not meet the
requirements

 Obtaining a license allows to conduct financial transactions in all the territories of the
European Economic Area in accordance with MIFID.
 Lowest income tax in the EU i.e. 10% (Cyprus transaction) and 0% (transaction outside
the country)
 Incorporation and obtaining license: from 5 to 9 months
Minimum paid up capital: EUR ~ 125,000.00 or EUR 730,000.00 depending on the license type
(STP or MM)
License government application fee:  4,000.00 EUR +19% VAT
Investor’s compensation fund:  EUR 20,000.00- 30,000.00 (approx.)
License renewal government fee: EUR 4,000.00 + 19% VAT
2 types of licenses available in Cyprus
 Standard license –approx. EUR 125,000.00, broker can hold clients’ money but cannot
trade on its own account (STP)
 Full license - requires approx. EUR 730,000.00 – broker can deal on its own account
(market maker MM)

Company structure
 Only 1 shareholder required ,can also be a legal person and there is no nationality
restriction
 2 executive and 2 non-executive directors are required
 The beneficial owners details should be disclosed to the authorities
 Shareholders details and directors should be part of public record

Taxation
 Low corporate tax (12.5%)
 0% tax for corporate gain
 Lowest VAT at 19%
 No withholding tax on dividends
 Access to EU directives and EU VAT registration
Accounting requirements-Regular accounting and audited submission is required
Registered office is required
Local employees –Required (3 and more)
Company Name: A company name must be necessarily end with LIMITED and must be
approved by the Registrar of companies

Top Binary option brokers registered with CySEC

 IQ Option
 Opteck
 Stockpair
 24option
CIMA
The Cayman Islands are located in the Caribbean and known as major financial centers in the world.It is
well regulated and has a very positive reputation among the investors.

Timeframe: Around 6 months

Minimum paid up capital: KYD 100,000 (>USD 121,000)

Features

 The license allows to accept and transmit funds

 Allows to execute orders on behalf of the clients
 Allows to Underwrite financial instrument
 Allows for securities management
 No local presence required
 Bank account can be held in any bank not necessarily in local bank
 High level of asset protection
 No local income ,corporation ,capital gains ,profits or withholding taxes for Cayman
exempted companies

Company structure

 At least one shareholder required , legal entities are allowed and there is no restriction
with regards to citizenship or residence
 At least 2 directors required with no restrictions on citizenship or residence
 The company must appoint a director

Taxation

 No corporate tax
 Income tax on money earned outside of its territory is not charged
 No interest tax
 No dividend tax
Accounting and audit requirements

 Required to submit quarterly returns

 Submission of annual audited financial statements

Registered office - Required

Registered Agent - Required

Secretary – Required

Top Binary option brokers registered with CIMA

 Trade View
 Spectre.Ai
 HYCM
 ATC Brokers
 VantageFX

FCA
FCA stands for Financial Conduct Authority which supervises the operations of the brokers
based in the UK.It sets the standards for the financial products that are being offered by the
binary options brokers.
Requirements
 A strong background in finance and investment is required for all directors of an FCA
licensed broker
 A physical office with a local director in UK is a compulsory requirement
 Timeframe for approval : 12 months
 There are 2 types of paid up capital depending on the permission granted by FCA
 125k euro
 750k euro
 Membership fee : Ranging from 31k euro to 51k euro one time fee which is compulsory

Top Binary option brokers registered with FCA

 Banc de Binary
 AnyOption
 OptionWeb
Binary Options Tech Costs
The quality of trading platform is also an important factor for consideration. The binary option’s
Application’s trading Software should be well designed to encompass and host vital features
needed for the smooth running of business. If the platform is not well designed, the customer
will have a hard time navigating it also may lead to a failed trade. On top of the that the user is
under pressure as trade lasts only 60 seconds. Hence the platform should be navigable easily
and faster.

The platform should support numerous pairs of currencies, commodities and provide the fin-
analytic tools which will help the navigators conduct market analysis. Another important aspect
of this is the mobility of the Applications Software. For example, currently in the market there is
a range of Application Software such as Invinctus indicator, Romanus robot, and the IQ-option
MT4 copier for clients who engage in binary business.

Using these tools we can set-up our own “white label” platform for binary options trading. The
trading platform is divided into 2 clients. A desktop trading platform and android/iOS
application. Most brokers follow this format of desktop + mobile client.

Apart from these there are costs associated with hosting a website, server and domain costs.
Backend server costs to run the application. Mobile app development and maintenance costs.

What is White Label?

White Label is a ready-made forex/Binary Options brokerage solution that can be rebranded
and used by brokers as their own for a small licensing fee. It will save costs that we will spend
on development of forex trading platform right from scratch. Developing from scratch also
requires expertise and manpower that is inaccessible.
Meta Trader 4 licensing

MetaTrader 4, also known as MT4, is an electronic trading platform widely used by online retail
foreign exchange speculative traders. It was developed by MetaQuotes Software and released
in 2005.

The software is licensed to foreign exchange brokers who provide the software to their clients.
The software consists of both a client and server component. The server component is run by
the broker and the client software is provided to the broker’s customers, who use it to see live
streaming prices and charts, to place orders, and to manage their accounts.

In 2010 they released a successor MetaTrader 5, however MetaTrader 4 is still very popular and
its use is widespread.

Using MT4 and MT5 as our binary options platform will be cost effective as we do need to
separately have website development, payment processing or a CRM solution.

Pricing

White Label
Source - https://mt4-whitelabel.com/pricing-fees.html#linkit

Plan Setup Monthly

Basic $5,000 $2,500
Standard $6,700 $4,000
Premium $7,500 $4,500

Features
Basic -

 MT4/MT5 White Label

 Tradersroom/CRM
 Company Registration (UK)
 Website Designing & Hosting
 Payment Gateway
 live Chat Application
 IB & Affiliate

Standard

 MT4/MT5 White Label

 Tradersroom/CRM
 Company Registration (UK)
 Website Designing & Hosting
 Payment Gateway
 live Chat Application
 IB & Affiliate
 Virtual Dealer Plugin
 TradeCopier
 Plugin Box

Premium

 MT4/MT5 White Label

 Tradersroom/CRM
 Company Registration (UK)
 Website Designing & Hosting
 Payment Gateway
 live Chat Application
 IB & Affiliate
 Virtual Dealer Plugin
 Plugin Box
 Trade Copier
 PAMM Software
 MAMM Software
 CRM Mobile App
 Mobile Manager
Grey Label Options

A grey label is a name for launching the MetaTrader platform with someone else’s branding on
the platform. It is the cheapest way to set up a Forex/Binary Options brokerage business. The
obvious downside to this is that customers may be confused that the branding is different to
your own company as we cannot brand it under our own brand name.

If launching with a grey label the partner can promote their business using the direct name of
the technology partner on the platform. The partner also has some element of control of their
client groups and client relationships in comparison to a plain vanilla introducing broker (IB)
relationship. This business model is suitable for larger than average IB’s who do not want to
undertake greater costs but are interested to build their own brokerage.

Pricing Under Grey Label

Plan Setup Monthly

Basic $500 $1,500
Standard $950 $2,000
Premium $1,500 $2,700

The feature-set offered is same as under white-label

Asset Options Available

Securities

· Forex 48+

· Indices 10+

· Energy 8+

· Metals 15+
· Crypto 20+

· 3 Groups B Book (spread defined by client)

User Management

 Dealer (manager open trades with edit price/order placing)

 Journal
 User Management (Unlimited)
 Deposit/ Withdrawal (Unlimited)

Android/iOS app development (Optional)

The white/grey label business models only offer a desktop client that is website based. We can
go further to set up our own mobile app to make the business more accessible to customers.
The white/grey labels provide with API’s that we can integrate into mobile apps so that
information flow can happen between server and mobile client in a way similar to server and
desktop client.

It will require additional infrastructure and personnel. For android apps, Google Firebase is a
popular choice as it provides both an IDE (for app development) and infrastructure such as
cloud storage, hosting static webpages, chat messaging function, real-time databases etc.

The pricing model is pay as you go, with a free base plan. That means initially when the app
userbase is low the platform charges are free. As the app grows and the number of users' scale,
they charge you based on the infrastructure you use.
Therefore, for a small userbase of 10000, the monthly charges for the app are free.
And once the app reaches 1 million users the monthly charges are calculated at $3,218.

The App development costs will include a team of 5-6 android developers and equipment such
as workstations and laptops. The industry average salary for a with-experience android
developer is 7 LPA.
Hardware + Software licenses would set back by around Rs. 12L (6 laptops + 2 workstations +
software licenses)
Set-Up Costs

SET UP COSTS Cost/unit Notes

Operational infrastructure variable
Trading platform setup $5,000 (standard plan)
Trading platform monthly $2,500 (standard plan)
Testing platform setup $5,000
Office $16,000 Rs.12 lac INR (6 laptops + 2
network(servers,workstations,p workstations + software
rinters) licenses)
Selecting and registering $15
domain website
Online payment integration and Nil
costs
Office Infrastructure variable
Company incorporation cost $200
Choosing company name $120
-Trademark
Hiring employees (annum) $55,541 + Extra 7lpa x 6 (software team)+ back
end support
Training costs -
Regulation setup $8,09,899 CySec Registration
Android App Infrastructure $3218 (1 million downloads and 500k
monthly (Optional) monthly active users)

Development Timeframe
Website Designing: 4-5 Days (By White label provider)

MetaTrader5 Manager Configuration and all services up and running: 2-3 Days (By white label)

Android App Development - 3-6 months

Market Size and description
Binary trading has seen a rapid growth over the las few years. This simple method of investing
reduces the need to spend hours researching and evaluating a stocks potential, resulting in an
automated form of investment.

Many factors have contributed to the rapid growth of binary option trading market.

 Ease of trade that is available with binary trading

 In 2008 ruling by the U.S. Securities opened up the market for the investors not involved
with an institution.
 The American Stock Exchange and Chicago Board Options Exchange also opened up
binary trading to public trading.
 Ability to control risk and reward and the consistency among all binary trading has also
contributed to the rapid popularity of the binary trade market.

There are more than 48000000 registered users on the binary options trading platforms with
over 1000000 transactions per day

The major currency pairs used as an underlying asset in binary options trading are:

 EURUSD (EuroDollar)
 GBPUSD(PoundDollar)
 USDCHF(DollarSwissie)
 AUDUSD(AussieDollar)
 USDJPY(DollarYen)
 USDCAD(DollarLoonie)