Rog; a "shotgun" answer to guide you:
*In the states? forget about it
*Offshore, it's possible, but wholly OTT. You will have to find a balance between a jurisdiction that is held in high regard and the reserve capitals. Bargain Bucket is $10m+ held in USD reserves, plus any funds that must remain "domiciled", for a banking license in a jurisdiction that will get you a meeting (but you might not make it to the pudding course) without them seeing you as simply high end retail. I should think at least $100m+ to be taken seriously (I'll explain why later).
*Have you even thought about the staff you'll need to run it? $750,000pa bare minimum for Legal + compliance (and you will need one), IT, "domiciled" staff, and someone to smooth the gaps. Not including real estate and facilities etc..
* Do you actually want to be a Bank? Basically BANK can accept deposits from the public, provide bank accounts, set up direct debits for BT, everything. This is probably way beyond the requirements for what you want to do - what many people think of as banks are actually brokerages or capital management firms, including some of the legacy names.
* Given that, forget about a banking license; look into a Capital management or Brokerage license.
* Even if you get the capital reserves, and a swish team of legislators to pull you through the application, the jurisdiction will still want to do their due diligence - ticking all the boxes isn't enough, you have to know what your doing and be able to prove it (and with due respect, if your asking strangers on the internet, you don't).
...* The real challenge you have is not the offshore jurisdiction, it is the banking community. Having a banking license is f*ck all use if nobody will deal with you; If you want to act as a legit FX broker, you will need to establish relationships with the "real" money - bear in mind that FX is still OTC, and if HSBC decide they don't like your haircut (or your jurisdiction), they don't have to sell you any Yen (even SPOT - forget about forwards). And you need pretty swish banking facilities (Swift and CHAPS (?) min) to deliver the currency to your clients, you can't really send it Western Union. And anyway, min. deal size is $100k, which is probably more than your clients are after.
*So, given that you can't really source or deliver any currency competitively, the next option would be to simply provide a "tradeable" price for speculation, a bit like NDF's across all pairs (??) and the FX trading most of us are familiar with; How are you going to hedge out your risk? You could hope that the sum of your counterparty positions sums to nil - that is, there are an equal number of long and short positions for any currency. Invariably it doesn't work this way (the "wobbly bridge" scenario); so you'll have to hedge it out with other houses, see above.
*Where are you going to get your prices from? If it's just you providing them, you are unlikely to attract customers (conflict of interest). You could try and build relationships with other houses, get access to their prices, and run them through an algo, on to your own clients - with two "sides" of spread (your end, and the houses' end); And you run the risk of getting "legged out" as you try to hedge a client trade with your bank (and i think that the price you'll get from your bank won't be the best price they are showing elsewhere anyway, you might even have to RFQ if your that small). And you have fees to pay.
The Offshore stuff I am pretty sure is accurate but I can't go into much more detail; the nitty gritty FX stuff specifically is not my department, but there are very knowledgable, wholesale, guys that might be kind enough to explain why you should give up the idea immediately. Being a BROKER is about VOLUME. You need to be competitive with prices to generate this volume, and to be competitive you need SIZE. The only realistic options you have are to become an Introducing Broker for an existing product in the marketplace, or become an SB firm. There is little space or tolerance, both in offshore jurisdictions and the Inter-bank market, for amateurs - especially considering the climate at the moment.
. I realized that this idea is much too hard to make into a reality.
