An introducing broker (IB) is a person or firm who solicits or accepts orders to buy or sell futures contracts, options on futures, retail off-exchange foreign currency contracts or swaps but does not accept any money or other assets from customers to support these orders.
An IB must register with the Commodity Futures Trading Commission (CFTC) as a Futures Commission Merchant (FCM), and must be a member of the National Futures Association (NFA).
The term "introducing broker" is also used in the securities business to refer to a broker-dealer that does not hold customers' securities or funds and does not carry any inventory, but introduces customers to another broker-dealer that does.
What is an FCM? FCM stands for Futures Commission Merchant. It is a firm or individual that solicits and accepts orders to buy or sell futures contracts, options on futures, retail off-exchange forex contracts or swaps, and accepts money or other assets from customers to support such orders.
An FCM must be a member of the National Futures Association (NFA), which is the self-regulatory organization for the futures industry in the United States. All FCMs must be registered with the Commodity Futures Trading Commission (CFTC), which is the federal regulatory agency for futures trading.
An FCM must maintain certain minimum financial requirements, which are set by the CFTC. These requirements include minimum net capital requirements and customer segregation requirements. FCMs must also meet certain recordkeeping and reporting requirements.
FCMs are required to have compliance departments that are responsible for ensuring that the firm complies with all applicable laws and regulations. FCMs are subject to periodic audits by the NFA and the CFTC. Who is not considered an associated person? The answer to this question depends on the regulatory framework within which you are operating. For example, in the United States, the Commodity Futures Trading Commission (CFTC) defines an "associated person" as "any partner, officer, director, or branch manager of a futures commission merchant, retail foreign exchange dealer, commodity pool operator, commodity trading advisor, or introducing broker, any person registered with the Commission as a floor broker or floor trader, and any other person so designated by the Commission from time to time by rule or regulation."
In the United Kingdom, the Financial Conduct Authority (FCA) defines an "associated person" as "a person who has entered into an agreement with an authorised person under which the person undertakes to perform one or more controlled functions on behalf of the authorised person."
Each regulatory framework has its own definition of an "associated person", so it is important to consult the relevant regulator in your jurisdiction to determine who is considered an associated person.
What is the difference between executing broker and clearing broker? In general, the main difference between an executing broker and a clearing broker is that an executing broker executes trades on behalf of its clients, while a clearing broker clears those trades.
In the context of futures and commodities trading, an executing broker is a member of a futures exchange who executes trades for clients and is responsible for the financial settlement of those trades. A clearing broker, on the other hand, is a member of a clearinghouse and is responsible for ensuring the financial settlement of trades between members of the clearinghouse.
In most cases, a single firm will act as both an executing broker and a clearing broker for its clients. However, there are some firms that specialize in one or the other. For example, a firm that specializes in executing trades might not offer clearing services, or a firm that specializes in clearing might not offer execution services.
What is an introducing broker FINRA?
An Introducing Broker ("IB") is a futures commission merchant ("FCM") that solicits and accepts orders for the purchase and sale of commodity futures contracts and options on futures contracts, and introduces customers to FCMs.
In order to become an IB, a firm must first become a member of the National Futures Association ("NFA"). To become a member of the NFA, a firm must:
- Apply for membership by completing the NFA Form 7-R;
- Pay the required membership fee;
- Obtain an NFA Associate membership; and
- Meet the minimum net capital requirements.
In order to become an IB, a firm must also:
- Register with the Commodity Futures Trading Commission ("CFTC") as a Futures Commission Merchant;
- Become a member of a designated contract market or derivatives transaction execution facility;
- Obtain a guaranty fund membership;
- Comply with the CFTC's minimum financial requirements;
- Comply with the NFA's requirements for FCMs; and
- Comply with all other applicable CFTC and NFA rules and regulations. What does IB mean in finance? IB is short for Interactive Brokers, a US-based brokerage firm that offers trading in futures, commodities, and other financial instruments. The company was founded in 1977 and is headquartered in Greenwich, Connecticut. IB is a member of the New York Stock Exchange (NYSE), the Chicago Mercantile Exchange (CME), and the National Futures Association (NFA).
Interactive Brokers offers trading in a wide range of financial instruments, including stocks, bonds, options, futures, commodities, and currencies. The company also offers a variety of account types, including individual, joint, and corporate accounts. IB also offers a variety of research and educational resources, including a trading platform, market commentary, and educational videos.