The VFSC is the "Vanuatu Financial Services Commission", which is the financial regulatory authority of Vanuatu (VFSC website).
Why use a license from Vanuatu?
Brokers that have clients using leverage of 500:1 might look to license within other jurisdictions enabling them to continue offering this leverage to clients, to that ratio.
Within Vanuatu there is no leverage restriction on brokers financial products. Therefore brokers wishing to offer clients a higher leverage product can on-board them via this license.
Be aware, if you are on-boarded via a license outside of your country of residence, the protection you might receive for the money in you brokerage account differs to the regulation under the VFSC license.
For some traders, this is a red flag, for other traders, that wish to access higher leverage, it's a known but accepted risk.
The three main reasons a broker might use a VFSC license.
1. Speed of getting a license.
The speed on setting up a license in Vanuatu is competitive verus other jurisdictions. Providing all documents and required information is submitted on time, a license can be granted with just 3 months. Keep in mind this is much quicker than other regions that have different application processes.
For example, approval for a Cyprus (CySec) forex license can easily take over 12 months.
Often forex brokers looking to obtain a fast license, consider VFSC. Consider this when selecting a broker, are they going to be around for long, is this broker trust worthy. Often a brokerage will have several licenses in addition to one with the VFSC.
2. A VFSC license is cost effective.
A Forex Broker license in Vanuatu is cost effective, especially when compared to other "offshore regions" like Belize or Seychelles.
If a business is launching a forex brokerage it might make sense financially to begin with a license in Vanuatu saving costs initially and then build a brand. Again, watch out for brokers that wish to establish a brand, not setup and close.
3. A Vanuatu dealers in securities license offers flexibility
Establishing a forex broker license in Vanuatu offers flexibility compared to other regions. Unlike a licenses in other areas with leverage capped at certain levels, there are no leverage restrictions for forex brokers licensed in Vanuatu.
In addition, VFSC licensed forex brokers are able to operate as either a market maker or provide straight through processing (STP). The VFSC also permits PAMM/MAM accounts with the inclusion of money management services.