Starting a Brokerage as a White Label: Pros and Cons

Even some top-tier brokers started out as white labels - but what are the pros and cons?

At the initial stage of starting a broker, you will definitely have a lot of questions concerning the platform, like what to do with the platform next, how to configure it, how to connect a trader to online traders room, how to connect payment systems, and so on.

However, there is actually an easier and faster way for a start-up broker to get to the market. To avoid all this headache, you can rent a part of the server from any company that offers such service, or in other words to start a white label company (WL).

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What is a white label?

Putting it simply, an established company, which already owns a platform and has enough experience with the technical configuration of the platform and all accompanying issues, gives you a part of its MT4 server, branded client terminal and all of the necessary admissions.

As a result, you don’t incur high initial costs and can start a broker without buying your own trading platform. In this case you pay a monthly fee for a WL and a relatively small set-up fee for installation and configuration of your server side.

What are the pros and cons of a WL?

PRO: Lower entry barriers.

It goes without saying that purchasing the whole server is a challenging, costly and risky endeavour. You should be well aware of business specifics and have a thoroughly thought out business plan to start your brokerage with buying your own platform.

However, with the WL model you can have the same value proposition as the server owner but with lower initial costs.

CON:  No economies of scale.

At the same time, as your client base grows bigger, you will have to pay more and more for the WL service and at some point you will have to buy your own trading platform.

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PRO: Easy maintenance.

You don’t need to deal with renting servers, going deeper into trade dealing specifics, trading platform configurations and other technical things. All of these things will be done by the company providing you with a WL.

CON: Dependence on platform owner.

One more thing to take into account is that when you are renting a server, you will be placed there with other brokerage companies, so you will not be able to configure all of the available MT4 server settings or use plug-ins or add-ons from third party developers, as this may affect the performance of the entire MT4 server, and therefore the operations of other companies placed on the same server.

However, this problem can be partly solved by using technological solutions that don’t require installation on the server and only need managerial access to the platform.

In addition, there are plenty of so-called  ‘bundled labels’  solutions on the market. That means that you can find a white label offer that already includes some needed technological enhancements, like access to multi-bank liquidity, server maintenance, asset-management system and others.  Nowadays this is only a matter of price.

Conclusion

Summing up, the major disadvantages of a white label solution such as lack of control and dependence can be overcome to some extent.  Even some top-tier brokers started as white labels.

Thus, it can be considered to be a smart way to take the first steps in the brokerage world without enormous expenses.

As the business grows it is never late to switch to the server-owner model.

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