What are the pros and cons of opening the account through an Introducing Broker? In particular, can they falsify a withdrawal request submitted to the clearing FCM and direct the wire transfer to their own account? Can FCM's treasury department be easily tricked like that? Are there any other risks associated with using an IB? On the other side, how can an IB offer lower commission rates than the clearing FCM itself? I would have thought the more middle men, the higher the rate - is it not the case?
With regard to commission rates. If you are a "small" client, they are not staffed to support thousands of clients and don't want that many calling and emailing them. Some will either not take your account or charge more than an Introducing Broker that gets bulk rates. It really depends on the size of your account, the services you require, your monthly volume, your overnight average margin, the symbols you trade, your strategy and the balance sheet of the FCM. You will find that smaller FCMs will provide better rates for small customers that DT, but not for those that take over-night positions or trade options. Do you want to be at an FCM with under $25mm in capital to get lower rates? How about one with under $5mm?
An IB is like a very large client of an FCM that does large volume and receives better rates than what an FCM would give smaller clients direct. The IB is therefore in position to pass on lower rates to its clients providing it manages it's costs effectively. The benefits of going through an IB is they can provide better rates to small to medium size clients and service their needs better. I doubt any IB that's been around for a while would risk their business by fraudulently withdrawing clients funds for personal use or steal your money.
What about the other question? In other words - are my funds any safer if I go through an IB, or just as safe as when I go directly to FCM?
Just as safe because I'm fairly certain your funds will be held with the FCM. You need to check that for yourself.
I don't know why there would be any difference. We can only transfer money to your checking account not to ourselves. The FCM controls the money movement.
Sure, but you can swap the account number for your own and commit fraud this way. Another question, if you don't mind - if my funds are in the form of T-Notes, or foreign government bonds, are they specifically assigned to me, so that in case of bankruptcy this gives me more protection compared to depositing cash? Also, what is the difference in repsect of funds safety between a guaranteed IB and an independentIB? Client accounts with GIBs are backed by the capitalization of the IIB, not the FCM?
Your money will be in a segregated account at the FCM not the IB. I can't guess at the number of ways someone can steal your money. If an employee of the FCM were to do something, you would be made whole. There are policies in place to protect you. I don't know how securities like T-Bills are handled in a futures account.