An introducing broker is a financial professional who works directly with customers who want to trade securities. Customers’ trades may not be executed by the broker. Instead, he or she takes orders, gives advice, and deals with any issues that arise. The trades are delegated to futures commissions merchants on the trading floor. On behalf of the client, the merchant works to obtain the best possible deal.
Introducing brokers can be compared to customer service representatives. Some work for large corporations, delegating trades to another division. Others work independently and collaborate with a futures commission merchant, which accepts commissions from a variety of brokers and firms. Networking with customers and executing trades on the floor require different skills, and splitting these tasks between two different financial professionals can benefit everyone involved.
Clients are met by the introducing broker, who accepts orders and forwards them to the futures commission merchant. Introducing brokers do not handle cash or securities; instead, the client sends these to the broker’s merchant under separate cover. Customers place orders with the introducing broker, who then passes them on to the futures merchant. Introducing brokers also provide their clients with incentives such as rebates and promotional materials.
Working with an introducing broker has several advantages, including the fact that because all of the broker’s accounts are pooled, clients have far more clout than they would on their own. To avoid losing a lucrative account, futures commission merchants are eager to resolve problems and disputes. Furthermore, being a member of a group gives clients access to bonuses for large trades and other special benefits that they would not otherwise have.
Depending on where someone works, having training and a license may be required to serve as an introducing broker. People may begin their careers working for companies that pay for their training and licensing, allowing them to gain experience while they learn. An introducing broker can consider working independently once they have reached a certain level of competency. Some brokers may be able to keep their old firms by collaborating with their futures merchants and directing clients to them.
This is a good career for people who are interested in securities and are good at dealing with customers. Introducing brokers deal with a wide range of clients and must be creative in terms of services and account options in order to attract and retain clients.