What is an Introducing Broker

Discussion in 'Retail Brokers' started by newwurldmn, Jul 26, 2011.

  1. Firstly, to moderators: I wasn't sure where this question should be posted, so I figured I would put it here. If this thread should be moved, please move it.

    What is an introducing broker? What service and value do they provide to a customer? I see a lot of them advertising here, but can't figure out what they offer.

  2. rmorse

    rmorse ET Sponsor

    An Introducing Broker (IB) is a broker dealer that has an IB relationship with a Prime Broker. The Prime Broker is where your cash and securities are custody and cleared. The IB offers the relationship to the Prime Broker for you. The IB becomes the next inline on the losses on your account, so leaves a deposit with the prime broker and has written agreements. Prime Brokers don't want accounts direct to them unless they are very large accounts with a lot of volume. In that case, an employee of the Prime would be your broker on the account. In the case of using an IB, the IB would be the broker on the account. The IB becomes your single point of contact for all business with the Prime Broker.

    An advantage to using an IB, is choice. If I have a large account and want to go direct to let's say GSEC (Goldman Sachs Execution and Clearing), then they will want me to use them for all my clearing and electronic transactions. Which means using REdiPlus. If you use an IB, you can trade on any platform the IB has access to, clear through any Prime Broker they have a relationship with, and get the benefit of their direct service. If you go direct, good luck finding the right party when you have issues.

    A good IB will help you run your trading business through all their relationships. We have relationships with multiple Prime Brokers, many platforms, attorneys, accountants, administrators, IT hosting companies, data providers and can often help with capital introduction.

    I hope this helps.