An introducing broker (IB) is a broker in the futures markets who has a direct relationship with a client, but delegates the work of the floor operation and trade execution to another futures merchant, typically a futures commission merchant (FCM).
Introducing brokers help increase efficiency and lower the workload for futures commission merchants. The arrangement allows for specialisation where the IB focuses on the client while the FCM focuses on trading floor operations.
Stockbrokers are registered with the Securities and Exchange Commission (SEC) and are regulated by the National Association of Securities Dealers (NASD) or Financial Industry Regulatory Authority (FINRA). Futures introducing brokers are registered with the Commodity Futures Trading Commission (CFTC) and regulated by the National Futures Association (NFA).
- An introducing broker (IB) advises clients in the futures market but delegates trade execution and back-office operations to others.
- The IB is usually affiliated with the FCM, either as an independent entity that is partnered with that merchant firm or as a direct subsidiary of that FCM.
- IBs are better able to service their clients as they are local, and their primary goal is customer service.