Introducing broker
Family VIII · Regulation
Not to be confused with forex broker, broker, asic regulated broker.
Introducing broker (IB) is a regulated category of intermediary that earns compensation for directing client business to an executing broker. The IB's role is limited to marketing, onboarding assistance and client support; the trade itself is booked and cleared by the broker that accepts the account. Registration requirements, permitted compensation structures and disclosure duties for IBs vary by jurisdiction and regulator.
What an introducing broker does and does not do
An IB typically performs some or all of the following:
- Introduces prospective clients to a broker under a written referral agreement.
- Assists with account opening paperwork and identity verification.
- Provides market commentary, education or local-language support.
- Receives a share of the spread, commission or a per-lot rebate from the broker.
An IB does not normally hold client money, act as counterparty to a trade, set margin requirements, or issue confirmations. Those functions belong to the executing broker, which remains responsible to the client and to the regulator. Because the IB is paid by the broker rather than by the client, disclosure of the compensation arrangement is a common regulatory requirement, though the specific form and timing of that disclosure differ between regimes.
Worked example: rebate calculation
An IB agreement might specify a rebate per standard lot traded by referred clients. The figures below are illustrative; actual rates are negotiated and vary widely by broker, product and volume tier.
If the agreement includes a minimum-volume threshold or a clawback for clients who withdraw within a set period, the payable amount may be lower than the gross figure.
Regulatory treatment
Treatment of introducing brokers is not uniform. In some jurisdictions an IB must register as an agent or representative of the broker and pass a proficiency examination; in others it may operate under the broker's licence with only a referral agreement. Capital requirements, if any, are usually lower than those for an executing broker, and some regimes impose none at all. Where an IB is registered, the register entry normally names the broker it is authorised to introduce to, so the IB's permitted activity is tied to that relationship. Cross-border referrals can trigger additional registration in the client's country, depending on local rules.
Often confused with
- forex broker
- A forex broker executes and books client trades in currency pairs, whereas an introducing broker only refers clients and does not execute; the visible sign is whether the firm appears as counterparty on the trade confirmation.
- broker
- A broker acts as intermediary with authority to execute transactions for clients, while an introducing broker's authority stops at referral and account support; the visible sign is the absence of the IB's name on order tickets or confirmations.
- asic regulated broker
- An ASIC-regulated broker holds an Australian financial services licence covering execution, whereas an introducing broker may operate under a referral agreement without holding that licence itself; the visible sign is which entity appears on the ASIC register as the licence holder.
See also
- anti money laundering check
- asic regulated broker
- broker insolvency
- broker license
- cftc regulated broker
- chargeback