What is an Introducing Broker

Introducing Broker (IB) is term used in the financial market industry to refer to a commodity broker or a futures broker who has a direct relationship with a client though the execution of trade and other back office work are delegated to another Futures Commission Merchant (FCM). An FCM is also called a clearing firm for it works to do the actual work of trade execution and any other back office work related to the trade.

An Introducing Broker creates a connection with an FCM who then in turns create a direct connection with the futures exchanges with the sole purpose of executing trades.

What are the benefits of Introducing Brokers?

Give customers leading trading platforms

One of the benefits of Introducing Brokers is that they give customers access to some of the leading online forex trading platforms. This is because they get the best FCM offering the best forex services and have a great back office team.

Maximize their time

An Introducing Broker can maximize on his/her time because he/she is not tasked with the activities in the back office. Therefore, an IB can concentrate on expanding his/her business.

Paid based on the trading volume of their clients

An IB is paid based on the trading volume of his/her client. This means that an IB can make a lot of money if he/she has many direct clients with large trading volumes.

It is important to note that clients do not pay more when they trade using IB. The FCM and the IB have a system of sharing profits that do not influence what the client pays. Therefore, there is no negative financial implication of a client trading through an Introducing Broker.

More often, you will find the forex company dealing with an Introducing Broker offering free training to an IB. This training is meant to sharpen the skills of an IB to become better in the financial market.