An International Broker (IB) is an individual or organization that refers new clients to a trading company (a broker) and receives commission for that referral. The introducing broker, who earns a commission on the transaction, pays a fee for each trade and interest on clearing firms to the clients he introduces.
In commodities markets, IB is an agent who takes orders for futures contracts, but passes on responsibility for executing the orders and handling the financial arrangements to a futures commission merchant (FCM).
An IB acts as an intermediary between the broker and trader, connecting them with each other. By deciding to become an Introducing Broker, you are essentially establishing your own business. Like other types of brokers, IB make money by charging their clients a commission. An International broker (IB) is also known as a commodity broker or futures broker.
What does an International Broker do?
IB is the face that meets and helps the clients, while the futures commission merchant (FCM) is mainly referred to the clearing firm. International brokers and FCM’s have to work in flow to run a smooth trading firm. IB’s and FCM’s support one another in the development of the futures exchange market. IB’s present the trading to their clients in an enjoyable, easily understandable way. FCM’s, in a perfect business model, focus on clearing trades, accounting, account statements, compliance, and make sure everything is working in proper manner. International brokers are vital to the futures market because they help those who are new to the commodity market and adapt to the confused environment. IB’s are like full-service brokers, in that they are middlemen between the individual person and the trading market company. IB’s provide service to clients. They will help or assist clients who need full service or provide technical support to online traders. In general, a good IB will do their best to provide information, assist their clients with any trade-related and customer service issues. IB’s make their money through brokerages or commissions. FCMs charge the IB a fee for each trade.
The Role and Responsibilities of an International Broker
An IB is a firm that deals directly with the client; the trade execution and back-office work are the responsibility of a Futures Commission Merchant (FCM). An FCM is also called as clearing firm. Each IB has a relationship with FCM. The FCM has a direct connection with the futures exchanges to execute trades. FCMs supply trading platforms on which clients have the ability to place trades online. FCM’s are responsible for account management. One of the most important features of an FCM is that they deposit all customer funds in customer-segregated accounts.