Forex Trading as white label partner subject to less stringent regulations

Online Forex Trading acting as a riskless principal (“white label partner”) may benefit from a less restrictive regulatory regime than forex traders dealing on own account.

White label partners are confined to the execution of two matching trades (one with the client and one offsetting trade with another principal) entered at the same time and price, with the white label partner acting as counterparty to both transactions, meaning that their exposure is significantly less than those of forex traders dealing on own account.

Consequently, white label partners shall require a Category 2 licence –  “Licence Holders authorised to provide any Investment Service, and to hold or control Clients’ Money or Customers’ Assets, but not to operate a multilateral trading facility or deal for their own account or underwrite or place instruments on a firm commitment basis.”

Category 2 licence holders are subject to a significantly lower share capital of EUR 125,000 compared to EUR 730,000 (for a forex trader dealing with own funds)  and have to have own fund which are higher than either (i) the initial capital; (ii) the sum of all the risk components calculated in terms of the rules but excluding the operational risk component; or (iii) fixed overheads requirements.

The favourable corporate tax treatment resulting in an ultimate tax leakage of just 5% is applicable also to white label partners. View full requirements about Forex in Malta.