Getting Started for Introducing Brokers


These rules, which include the “Quote Rule” and the “Limit Order Display Rule,” increase the information that is publicly available concerning the prices at which investors may buy and sell exchange-listed and Nasdaq National Market System securities. Broker-dealers generally have an obligation to recommend only those specific investments or overall investment strategies that are suitable for their customers. The concept of suitability appears in specific SRO rules such as NASD Rule 2310 and has been interpreted as an obligation under the antifraud provisions of the federal securities laws. Under suitability requirements, a broker-dealer must have an “adequate and reasonable basis” for any recommendation that it makes.

features of the activity of introducing brokers

In addition, we discuss the special registration requirements that apply to broker-dealers of government and municipal securities, including repurchase agreements, below. However, as discussed below, under paragraph of the final rule, an FCM or IB, based on its risk-assessment of a new account, may need to take additional steps to verify the identity of a non-individual, such as obtaining information about persons with control over the account. In addition, the due diligence procedures required under other provisions of the BSA or the futures laws may require FCMs and IBs to look through to owners of certain types of accounts. Nothing in this section relieves a futures commission merchant or introducing broker of its obligation to comply with any other provision of this part, including provisions concerning information that must be obtained, verified, or maintained in connection with any account or transaction. The CIP must include procedures for providing customers with adequate notice that the futures commission merchant or introducing broker is requesting information to verify their identities.


Treasury and the CFTC emphasize that the FCM or IB and the other financial institution upon which it relies must satisfy all the conditions for reliance set forth in the final rule. If they do not, then the FCM or IB remains solely responsible for applying its own CIP to each customer in accordance with the rule. The FCM’s or IB’s CIP. The contract and certification will provide a standard means for an FCM or IB to demonstrate the extent to which it is relying on another financial institution to perform its CIP, and that the other institution has, in fact, agreed to perform those functions. If it is not clear from these documents, an FCM or IB must be able to otherwise demonstrate when it is relying on another financial institution to perform its CIP with respect to a particular customer.

An offering’s “restricted period” begins either one or five business days before the day of the offering’s pricing and ends upon completion of the distribution. The duty of best execution, which also stems from the Act’s antifraud provisions, requires a broker-dealer to seek to obtain the most favorable terms available under the circumstances for its customer orders. This applies whether the broker-dealer is acting as agent or as principal.

features of the activity of introducing brokers

A broker-dealer must give the customer this information at the time the account is opened, and must also provide credit customers with account statements at least quarterly. This fundamental duty derives from the Act’s antifraud provisions mentioned above. Under the so-called “shingle” theory, by virtue of engaging in the brokerage profession (e.g., hanging out the broker-dealer’s business sign, or “shingle”), a broker-dealer represents to its customers that it will deal fairly with them, consistent with the standards of the profession. Based on this important representation, the SEC, through interpretive statements and enforcement actions, and the courts, through case law, have set forth over time certain duties for broker-dealers. These include the duties to execute orders promptly, disclose certain material information (i.e., information the customer would consider important as an investor), charge prices reasonably related to the prevailing market, and fully disclose any conflict of interest. Within 45 days of filing a completed application, the SEC will either grant registration or begin proceedings to determine whether it should deny registration.

International Trade (Anti-Dumping)

As such, when deciding to register as a broker-dealer, it is important to plan for the time required for processing Federal, state, and SRO registration or membership applications. The definition of “dealer” does not include a “trader,” that is, a person who buys and sells securities for his or her own account, either individually or in a fiduciary capacity, but not as part of a regular business. Individuals who buy and sell securities for themselves generally are considered traders and not dealers. Introducing brokers help increase efficiency and lower the work load for futures commission merchants. The arrangement allows for specialization where the IB focuses on the client while the FCM focuses on trading floor operations. Introducing Broker program by FBS encourages the broker‘s partners to represent the company and offer clients their help and services.

Treasury and the CFTC have modified the proposed rule in light of these comments. It is the intent of Treasury, the CFTC, the SEC and the banking agencies that all the final rules implementing 31 U.S.C. 5318 be substantively identical, which approach was supported by commenters from all affected sectors of the financial services industry. Accordingly, Treasury and the CFTC also have modified the proposed rule for FCMs and IBs to maintain consistency and parallel treatment with the final rules imposing customer identification and verification requirements upon other financial institutions. The section-by-section analysis that follows discusses the comments and the modifications that Treasury and the CFTC have made to the proposed rule. Two commenters addressed the issue of permissible reliance between FCMs and IBs that share an account relationship with respect to the performance of customer identification and verification functions.

  • The specific types of databases that would be suitable for verification ultimately will depend on the circumstances and the FCM’s or IB’s assessment of the relevant risk factors.
  • Additionally, Introducing Brokers can enable Broker Client Approval which allows the Broker’s compliance team to approve all new client applications and client requests for options trading permissions before they are submitted and reviewed by IBKR.
  • The blockchain-based platform is the first to connect metals and cash settlement networks.
  • While every effort has been made to ensure that the material on is accurately displayed, consistent with the official SGML-based PDF version on, those relying on it for legal research should verify their results against an official edition of the Federal Register.
  • The “Sub-Penny Rule” prohibits market participants from accepting, ranking, or displaying orders, quotations, or indications of interest in a pricing increment smaller than a penny, except for orders, quotations, or indications of interest that are priced at less than $1.00 per share.
  • White branding allows IBs to display their own logos and company information on our Registration system, Client Portal, Reports, Trader Workstation and other materials.

White branding allows IBs to display their own logos and company information on our Registration system, Client Portal, Reports, Trader Workstation and other materials. White branding is a great marketing tool that can give your customers the impression that you are offering a complete package of in-house trading tools and supporting products. Introducing Brokers are able to charge a fee-per-trade unit for each asset class, markup interest rates, or manually invoice the client for services rendered. This lesson will serve as an introduction to configuring broker client fees.

Introducing Brokers: Gateway to FCMs

The Public Inspection pageon offers a preview of documents scheduled to appear in the next day’s Federal Register issue. The Public Inspection page may also include documents scheduled for later issues, at the request of the issuing agency. Autotrader™ RTD linking, establish native RTD links directly within Autotrader for enhanced performance and scalability.

We, through our clearing relationship, are situated to offer what we consider to be the most reasonable rates, the best platforms, and the best insights available in the industry. Some broker-dealers maintain a single line of business, and the related exemption is simple to identify. For instance, a broker-dealer that effects all of its business through a clearing broker-dealer on a fully disclosed basis would claim an exemption under . Likewise, a broker-dealer that operates solely in an M&A capacity would most likely claim an exemption under .

When opening an account for a foreign business or enterprise that does not have an identification number, the futures commission merchant or introducing broker must request alternative government-issued documentation certifying the existence of the business or enterprise. Treasury and the CFTC have expanded the reliance provision of the proposed rule in recognition that there may be circumstances in which an FCM or IB should be able to rely on the performance by another financial institution of some or all of the elements of the firm’s CIP. The final rule provides that an FCM’s or IB’s CIP may include procedures that specify when the firm will rely on the performance by another financial institution of any procedures of the firm’s CIP, and thereby satisfy the FCM’s or IB’s obligations under the rule. Reliance is permitted if a customer of the FCM or IB is opening, or has opened, an account or has established a similar business relationship with the other financial institution to provide or engage in services, dealings, or other financial transactions.

Lesson: #8Broker Commission Markups

Treasury and the CFTC note, however, that an FCM or IB with an approved AML program must nonetheless obtain approval of a new CIP because it would constitute a material change to the AML program. When verifying the identifying information obtained) need only be retained for five years after the record is made. The final rule continues to provide that in all other respects, these records shall be maintained in accordance with the provisions of the CFTC’s recordkeeping rule 1.31. Were a registered futures association and two futures industry trade associations. Commenters generally supported the proposal but suggested a few revisions.

features of the activity of introducing brokers

Likewise, if the intermediary opens an account in the name of a collective investment vehicle, such as commodity pools, an FCM or IB is not required to look through the collective investment vehicle to the underlying participants. John trades all markets, but concentrates his efforts in the agricultural sector, more specifically in the relationships revolving around the soybean crush. His trading methodology is based on fundamentals and a personally designed technical system. In 1996, John left Continental Grain to found Walsh Trading, Inc., currently a registered Guaranteed Introducing Broker and an NFA member. John’s focus at Walsh Trading has been on hiring and cultivating talented individuals and building relationships throughout the industry.

As a partner of a global broker, we can accommodate payments through a wide range of methods, and our account managers will be happy to discuss the perfect solution for you. Thales, which has invested heavily in technology since its creation in 2012, has entered into a multi-year agreement with Jefferies, by which Thales will equip Jefferies with an advanced web-based application to support its client base in futures, options, and foreign exchange. After successfully transforming this solution into an automated system we entered long-term support and evolution cycle and still update and tune this system according to customer requirements. The team that worked on these projects became a dedicated permanent team of our customers and today is an integral part of the whole business.

Marketing Materials

The Company may pay fee/commission to Introducing Brokers, referring agents, or other third parties based on a written agreement. Applies to Trades placed by Account Managers and proprietary traders other than FCMs and Introducing Brokers. Regulated by the Central Bank of Ireland , registered with the Companies Registration Office , and is a member of the Irish Investor Compensation Scheme .

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When executing brokers’ totals reach 70 percent of the assigned threshold, an alert message is transmitted to the clearing and executing firms. The clearing firm can reset thresholds any time during the trading day and has the option of setting unlimited thresholds. Our clients have access to a variety of customizable reports and statements for analyzing performance and reviewing account activity in detail. 5 In addition, Rule 11Ac1-3 requires broker-dealers to inform their customers, upon opening a new account and annually thereafter, of their policies regarding payment for order flow and for determining where to route a customer’s order.

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy. Tenant’s Broker real estate brokerage commissions as set forth in separate commission agreements between Landlord and Landlord’s Broker and Landlord and Tenant’s Broker, respectively. Interactive Brokers offers a solution for Introducing Brokers to use their own banners for white branding purposes.

– This exemption is restrictive and reserved for a broker-dealer that only does direct-way mutual fund or variable annuity business. A broker-dealer is prohibited from claiming the exemption if it conducts any other line of business activity. If a correspondent broker’s locked-in trades exceed the Super Cap amount, the ACT system will place a designated mark next to all of its quotes , and will cause all trades greater than $200,000 to be held for 15 minutes for clearing-firm approval.

Partners residing in Latvia are now required to be exclusive Tied Agents. For clarification or questions about this requirement, please contact us via email or live chat. With FXTM Partners you will have access to opportunities that expand your business-network and engage your traders while boosting your business.

As such, subsidiaries and affiliates of banks that engage in broker-dealer activities are required to register as broker-dealers under the Act. Also, banks that act as municipal securities dealers or as government securities brokers or dealers continue to be required to register introducing broker under the Act. Broker-dealers that limit their activity to government or municipal securities require specialized registration. Those that limit their activity to government securities do not have to register as “general-purpose” broker-dealers under Section 15 of the Act.

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