What Is an Introducing Broker (IB) in Forex?

If you are new to Forex trading, you might be wondering about what an IB or introducing broker is in the Forex market. You should know that an introducing broker is an affiliate of a forex broker and introduces potential clients to the broker. What happens is that the introducing broker obtains a commission on every trade that the client does.

With that said, as long as the client is trading on their account, the IB will get commission on every trade.

Primary Functions of An Introduction Broker

When it comes to the primary functions of an introducing broker (IB), you should see them as a professional advisor with a direct relationship with potential clients. The IB delegates Forex trade executions, typically to FCMs or futures commission merchants. Essentially, the IB serves as the middleman who advises potential clients on investing and also refers them to brokers who are active on trading floors.

The primary functions of an IB are as follows:

=> Acquiring Clients

Introducing brokers actively look for onboarding new clients for the brokerage firms.

=> Referring Clients

An introducing broker’s job is to refer clients to open Forex trading accounts with the respective brokerage firm that they have partnered with.

=> Customer Service

The functions of the IB include providing customer support to the respective brokerage firm and its clients.

=> Training and Education

An IB can also provide training and educational materials that can further help Forex clients succeed in their respective Forex trades.

=> Relationship Building

Another primary function of the IB is to establish long-term relationships with clients. This is done through the selection of the right broker and also providing them with continuous support.

It is important to mention here that an IB’s role doesn’t include the execution of trades. On the other hand, the IB’s role is to help potential clients access the Forex trading platforms through the brokerage firms. This aspect emphasises the fact that IBs get compensated through commissions on each of the trades that their referred clients make.

The Commission Structure

Typically, IBs follow the commission structure that is aligned with the Cost per Acquisition model. This model essentially focuses on client acquisition instead of the trading volume. According to the CPA model, the IB refers potential clients to their brokers through various strategies, including direct referrals, networking, and marketing.

The goal is to encourage the referred individuals to sign up for an account to initiate trading with the broker after they have met the criteria set by the broker.

Final Thoughts

Now that you know the key roles of an introducing broker, you might want to become one, too. Becoming an IB comes with loads of benefits, such as generating an additional stream of income from earning commissions. Becoming an IB comes with a low start cost, which makes it a great business opportunity. As an IB, you will have the leverage to work from anywhere according to your own schedule. As you will be expanding your client base, you will start earning higher commissions.

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