Houston Automotive Modeler's Society



Broker Ib Agreement

Posted on September 12th, 2021 in Uncategorized by


The introduction of brokers helps to improve efficiency and reduce the workload of futures commission traders. The agreement allows for a specialization in which IB focuses on the client, while FCM focuses on on-the-floor operations. An introductory broker (IB) is a broker in the futures markets that has a direct relationship with a client, but delegates the work of floor operation and trading execution to another futures trader, typically a futures commission (FCM) trader. IB is generally related to FCM, either as an independent entity partner with that trading company or as a direct subsidiary of that FCM. An introducing broker (IB) acts as an intermediary by comparing an entity seeking to access the markets with a counterparty ready to take over the other side of the trade. Generally speaking, IBs make recommendations while delegating the task of executing trades to someone who works in a trade market. The importing broker and the one who makes a transaction allocate the fees and commissions according to an agreed agreement. Introducing brokers play the same role in futures markets as stock brokers in stock markets. However, they are regulated by different authorities. Stockbrokers are registered with the Securities and Exchange Commission (SEC) and are regulated by the Financial Industry Regulatory Authority (FINRA).

Futures brokers are registered with the Commodity Futures Trading Commission (CFTC) and are regulated by the National Futures Association (NFA). FCMs offer trading platforms on which clients have the opportunity to place trades online and are responsible for managing the account. However, the majority of FCMs would find it financially impossible to open offices across the country to serve their clients. Here, IBs stand out, as they usually operate from smaller offices throughout the country. An IB is required to submit to its contracting entities and associated persons: IBOs allow FCMs to manage operations on a local basis while using FCM`s infrastructure for trade. Most IBs do not have the financial resources to execute trades directly for their clients, as this requires a direct relationship with futures exchanges and the high cost of maintaining accounts, trades and reports, as well as developing and maintaining trading platforms. A filing fee for contracting entities and PAs is not required if the person is currently registered in any capacity with the CFTC or is listed as the principal of a current CFTC registrant. A registration fee is only required if the person files a registration both as a PA and as a principal. A principle must be a PA.

A principle of IB forex should be a forex AP. A swap-IB principle must be a swap-AP. Many IBs are one-person businesses, while others are larger companies with multiple locations. IBs are better able to serve their customers because they are local, and their main focus is customer service. Outsourcing prospecting and customer follow-up to BIs creates economies of scale for FCMs and the industry in the long run. Registration is required for an IB unless the person or organization is:. . .

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