Introducing Broker: An introducing broker (IB) – the IB is the sales person of the futures industry. An IB handles operations for clients in the Forex markets, futures and option markets and they also manage the accounts of a number of investors.
An introducing broker provides a wide range of services such as:
-Advice to new investors. Helping them to understand how the market works and how to avoid the risk.
-Prevent costly mistakes by training the customer, to diminish the probability of losing money.
-An introducing broker has the experience necessary to evaluate market fluctuations, and find investment opportunities for the new trader.
-Development of strategies that match according to the customers’ needs.
-Access to privileged information.
-Usually an IB has been working in Forex market for a considerable amount of time, this allows for the creation of strong networking.
-Better customer service in brokerage firms.
An IB will take care of your investment and will work to make a profit.
There are two main types of introducing brokers:
-Guaranteed introducing broker: This is an IB whose operations are guaranteed by a Futures Commission Merchant-FCM. There is no minimum capital or financial reporting required for this type of IB. The FCM must carry all the accounts of a guaranteed introducing broker.
Independent introducing broker: For this type of IB, both minimum capital and financial reporting are required. Also, independent IBs have relationships with many FCM.
When a firm is starting in Forex market they usually prefer to work with a guaranteed introducing broker. This is because it is easier to work with just one FCM. As the company grows it is likely they consider becoming independent.
If your plan is to start investing in the Forex market, futures and commodities then an introducing broker may be convenient. It is easy to find an IB and most of them offer their services with a low fee. Make sure you research about what they offer and also their reputation before hiring anyone.