Introducing
Forex Broker Commissions
Why clients
don't pay more money when they go through an IB.
Introducing brokers
are compensated by the brokerage or clearing firm (the company that opens the clients'
accounts) they work with. Clients do not pay higher
commissions or have higher spreads because they go through an introducing
broker instead of going straight to the clearing firm. In fact, if
a client allows the IB to "introduce" him to the clearing
firm, the client can be eligible to receive special services that only
the IB can offer; for example, free training.
How can the clearing firm compensate the IB
without making the client pay for it? Good question. The
clearing firm "SHARES" part of the spread with the introducing
broker while giving the client access to the same tight spreads that
are available to all other clients of the clearing firm. The clearing
firm depends on introducing brokers for a major part of their business.
Clients are not charged a commission. Both the clearing
firm and the introducing broker only get compensated from the spreads that exist between the bid and ask prices for the
given currency pairs [this is different than in the stock market, where
customers must pay a commission to their brokers on every transaction,
and also have to deal with the spread - Forex Day Trading gets compensated from the BID/ASK spread. IB's that also introduce managed
account customers can also receive a portion of the money manager's
profit fee. Click here to learn more
about managed forex IB's.
IB
Compensation Diagram (for retail or do-it-yourself traders)
Forex
introducing broker retail business model
Forex
IB Compensation Diagram for Managed Accounts
Forex
introducing broker managed accounts business modelThe above diagrams
demonstrate how a forex IB is compensated. Notice that the managed forex
IB's have an additional source of revenue from the money manager's profits (if any).
Since the forex money manager's compensation is based on a percentage
of the profits generated for the customer, he shares a portion of his
"profit incentive fee" with the IB that introduces the customer
to the money manager. For more information on getting compensated by
introducing higher net worth customers to top-ranked forex money managers,
go to the managed forex IB section.
If you have any
questions , call us at 1.305.600.4651
(for
international callers).
You can also click here to send us
an email and request that we call you back.
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