As the business world becomes increasingly competitive and global, access to an adequate amount of liquidity when dealing with foreign currencies has never been more critical. But achieving that liquidity is not so easy. Regulation and taxation sit on top of a forex market that is experiencing an unprecedented level of volatility and uncertainty. For this reason and others, small and medium sized businesses that need to conduct forex trading on a regular basis should consider using offshore forex brokers.
Most smaller businesses today will be exposed to the forex market in some way. Even if their customer base is local, they may be working with international vendors, service suppliers, and contract workers. As profit margins tighten, securing the best exchange rates and earning differential profits are increasing in importance.
In recent years, the internet, combined with mobile and automated technologies has played a big part in the expansion of the online trading ecosystem. It is now easier than ever to escape geographical boundaries and access offshore Forex trading from anywhere in the world.
But how does offshore trading work, and what are the benefits and the disadvantages of using an offshore broker?
Offshore Forex Brokers Explained
An offshore broker is an unregulated broker that gives you the ability to open an investment account outside the jurisdiction of your original country. The idea behind it is that a different country can have a different set of regulations for trading that can benefit you. This is possible as some developing countries have a more liberal policy when it comes to forex trading. Their goal is to spur local economic development and expansion.
The regulatory relaxation means you can start trading as soon as you deposit your initial amount, regardless of the source of your cash or your credit score. You can use your offshore account to trade, invest in, or hold, depending on your financial needs and goals.
The Benefits of Using Offshore Brokers
Now that you know what an offshore broker is, here are some of the benefits to using an unregulated offshore Forex broker:
Flexibility. One of the most important benefits of using such a broker is the flexibility that comes with it. You can trade from anywhere in the world to anywhere in the world, no matter the time. At the same time, you can access a wide range of options to invest in such as Forex, stock, mutual funds, bonds, and the list can go on.
Lower Taxes. Using offshore brokers can help with tax savings as well as incentives for your small business. While regulated brokers need to abide by strict laws and regulations meant to ensure the fairness of the market, offshore brokers enjoy minimum government implication and the tax exemptions that come with it.
Greater Diversification. Many offshore forex brokers offer the ability to invest in multiple financial products, such as stocks, currency pairs, and commodities. This diversification helps businesses avoid potential volatility and and offset any losses with wins.
Privacy. Another underrated but highly important benefit of using offshore brokers is privacy. Most offshore brokers have clearly drawn confidentiality policies to ensure the protection of their customers. Information such as your account and your financial activity will remain private and will not be disclosed under any circumstances.
Asset Protection. When using an offshore broker, you protect your assets from any regulation that your original country might adopt.
In closing, the internet makes it easier than ever to open up a forex trading account, and there are countless online offshore trading platforms to choose from. Businesses interested in forex trading should research different platforms for qualities such as reputation, data security, a clear, easy-to-use UI, and access to tools and real-time trading data.
Business owners should keep in mind, though, that while the benefits of using an offshore broker for more flexibility and privacy might sound tempting, there are risks and costs involved. These include: the cost of opening an offshore account, the legal concerns, and the general financial risk of trading in forex.