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Independent Introducing Broker Definition Series 3

Contents: Introducing Broker vs White Label – Which is Best For You? Subpart B – Programs U.S. Registration H. Business Continuity Planning Th [...]


The define introducing broker-dealer must meet the statutory requirements to engage in a business that involves high professional standards, and quite often includes the more rigorous responsibilities of a fiduciary. Firms that run a matched book of repurchase agreements or other stock loans are considered dealers. Because a “book running dealer” holds itself out as willing to buy and sell securities, and is thus engaged in the business of buying and selling securities, it must register as a broker-dealer.

  • In commodities markets, an introducing broker is an intermediary who takes orders for futures contracts but passes on responsibility for executing the orders and handling the financial arrangements to a futures commission merchant .
  • All of this information is covered completely in our series 24 and series 26 exam prep software, textbooks and video training classes.
  • We deliver support, technology and service designed and delivered for your success.
  • IB also released the TWS Mosaic trading interface and the Tax Optimizer for managing capital gains and losses.
  • Prohibition on correspondent accounts for foreign shell banks; records concerning owners of foreign banks and agents for service of legal process.

For example, an affiliate may earn $600 CPA when the client they’ve introduced has deposited at least $500 and traded 2 standard lots within a 60-day period. Go Trading Asia covers the latest in Business and Economic News and Market Analysis, with the aim of Providing Readers with the knowledge and tools to make better informed financial decisions. In the world of Forex trading, there prevails various terms that are salient for you to understand.

Introducing Broker vs White Label – Which is Best For You?

Edge Clear’s objective is to simplify access to markets through outstanding broker services and solutions. You can maximize the benefit of reaching new customers when you add forex IBs in other countries or who speak other languages. As ESMA regulations tighten, you may wish to expand the number of traders you have from other locales. Issuers generally are not “brokers” because they sell securities for their own accounts and not for the accounts of others.

Also in 1995, Hong Kong began market making at the Hong Kong Futures Exchange and IB created its primary trading platform Trader Workstation and executed its first trades for public customers. For a futures commission merchant or introducing broker relying on non-documentary methods, the CIP must contain procedures that set forth the non-documentary methods the futures commission merchant or introducing broker will use. The term “Reportable Security” shall mean all designated securities as defined in Rule 6320B. Registered representatives can fulfill Continuing Education requirements, view their industry CRD record and perform other compliance tasks. If the offer looks good and you have examined your options, you may want to partner up or look around a bit longer for the right fit. Each AP must ensure proficiency requirements— sole proprietor, swap, and forex AP.

Interactive Brokers Inc. was incorporated in 1993 as a U.S. broker-dealer, to provide technology developed by Timber Hill for electronic network and trade execution services to customers. In 1983, Peterffy sought to computerize the options market, and he first targeted the Chicago Board Options Exchange . At the time, brokers still used fair value pricing sheets, which were by then updated once or twice a day.

Forex and CFDs are highly leveraged products, which means both gains and losses are magnified. You should only trade in these products if you fully understand the risks involved and can afford to incur losses that will not adversely affect your lifestyle. A person that is a major swap participant shall be deemed to be a major swap participant with respect to each swap it enters into, regardless of the category of the swap or the person’s activities in connection with the swap. However, if a person makes an application to limit its designation as a major swap participant to specified categories of swaps, the Commission shall determine whether the person’s designation as a major swap participant shall be so limited. A person may make such application to limit its designation at the same time as, or after, the person’s initial registration as a major swap participant. Broker accounts at Interactive Brokers give global regulated brokerage companies the means to reduce their operational, brokerage and clearing costs while providing electronic market access worldwide with our professional white branded trading technology.


IBs aid in creating liquidity, allowing for more efficient trading, which is especially beneficial for retail investors. By having an Introducing Broker on your side, you will have access to expert market advice and tailored trade solutions that make it easier to coordinate transactions. Futures commission merchants and introducing brokers in commodities are subject to the recordkeeping requirements set forth and cross referenced in this subpart. Futures commission merchants and introducing brokers in commodities should also refer to subpart D of part 1010 of this chapter for recordkeeping requirements contained in that subpart which apply to futures commission merchants and introducing brokers in commodities. Every futures commission merchant (“FCM”) and introducing broker in commodities (“IB–C”) within the United States shall file with FinCEN, to the extent and in the manner required by this section, a report of any suspicious transaction relevant to a possible violation of law or regulation.

Comments or questions about document content can not be answered by OFR staff. Please do not provide confidential information or personal data. In certain countries, it is required by law that Introducing Brokerages be regulated entities. This is the case in the United States, in which Introducing Brokers are required to be registered with the NFA, in order to be able to solicit the enterprise of US residents. Funds from more than 550 fund families and filter funds by country, fund family, transaction fee or fund type. Find third-party, institutional-caliber research providers and access research directly through Trader Workstation .

Subpart B – Programs

Broker-dealers are subject to examination by the SEC and the SROs. The appropriate SRO generally inspects newly-registered broker-dealers for compliance with applicable financial responsibility rules within six months of registration, and for compliance with all other regulatory requirements within twelve months of registration. A broker-dealer must permit the SEC to inspect its books and records at any reasonable time. This rule protects customer funds and securities held by broker-dealers.

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Fund your account in multiple currencies and trade assets denominated in multiple currencies. IBKR Lite provides commission-free trades in US exchange-listed stocks and ETFs. Salesman means an individual, other than a dealer, employed, appointed or authorized by a dealer to sell securities in this state.

U.S. Registration

Further, a broker-dealer name that is otherwise materially misleading would become subject to scrutiny under Exchange Act Section 10, and Rule 10b-5 thereunder, the general antifraud rules, and any other applicable provisions. To apply for registration, you must file one executed copy of Form BD through the Central Registration Depository (“CRD”), which is operated by FINRA. (The only exception is for banks registering as municipal securities dealers, which file Form MSD directly with the SEC and with their appropriate banking regulator.) Form BD contains additional filing instructions. The SEC does not charge a filing fee, but the SROs and the states may.

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In 2013, IB released the Probability Lab tool and Traders’ Insight, a service that provides daily commentary by Interactive Brokers traders and third party contributors. Also in 2013, IB integrated its trading notification tool into the TWS. The tool keeps customers informed of upcoming announcements that could impact their account, and a customer can set it to automatically act to exercise options early if the action is projected to be beneficial for the customer. An IB FYI also can act to automatically suspend a customer’s orders before the announcement of major economic events that influence the market. Was incorporated and began making markets at the Marché des Options Négociables de Paris and the Marché à Terme International de France futures exchange.

H. Business Continuity Planning

Broker clients can electronically trade or the broker may input trades for the client. Client markups by introducing brokers are limited to 15 times IBKR’s highest tiered rate plus external fees. In contrast, clearing and executing brokers receive assets or money directly from the clients. Futures introducing brokers are registered with the Commodity Futures Trading Commission and regulated by the National Futures Association .

This rule thus prevents a broker-dealer from using customer funds to finance its business. On May 3, 2007, IBG held its initial public offering through the Nasdaq and sold 40 million shares at $30.01 ($39.22 in 2021) per share. It was run as a Dutch auction handled by WR Hambrecht (which handled Google’s IPO similarly in 2004) and HSBC; it was the second-largest U.S. Interactive Brokers LLC is an American multinational brokerage firm.

Broker-dealers must also comply with many requirements that are designed to maintain high industry standards. The offer of real estate as such, without any collateral arrangements with the seller or others, does not involve the offer of a security. When the real estate is offered in conjunction with certain services, however, it may constitute an investment contract, and thus, a security. See generally, Securities Act Release No. 5347 (Jan. 4, 1973) .

sro rules

Once you’re done with that, you’ll be able to start reaping the benefits of being your boss in the exciting world of trading. Rest assured that you can make it as an IB in no time with some hard work and dedication. And Ivers Riley, former chairman of the International Securities Exchange, CEO of the Hong Kong Futures Exchange, and chief developer of SPDR funds. Interactive Brokers employs computer programmers and IT workers; programmers outnumber other employees five to one. As of 2015, approximately nine percent of employees work in legal or regulatory compliance departments. In 2021, the company announced that users would be able to trade cryptocurrencies such as Bitcoin and Ethereum.

The Electronic Code of Federal Regulations

An IB advises their clients but does not execute the trades themself. 5 In addition, Rule 11Ac1-3 requires broker-dealers to inform their customers, upon opening a new account and annually thereafter, of their policies regarding payment for order flow and for determining where to route a customer’s order. Broker-dealers must also file a quarterly summary of this information. This information is designed to permit the SEC to assess the impact these entities may have on the broker-dealer. Pursuant to the rules of self-regulatory organizations, broker-dealers are required to arbitrate disputes with their customers, if the customer chooses to arbitrate.


A fully disclosed account provides client information and identification, while a non-disclosed account provides no client data to the broker. During the GameStop short squeeze, Interactive Brokers briefly restricted trading of several stocks, along with other brokerages. In May 2017, IB announced the sale of the market making business conducted by its Timber Hill subsidiary, including its market making software, to New York-based Two Sigma Securities. In 2012, IB began offering money manager accounts and opened the fully electronic Money Manager Marketplace. IB also released the TWS Mosaic trading interface and the Tax Optimizer for managing capital gains and losses. In 2006, the IB Options Intelligence Report was launched to report on unusual concentrations of trading interests and changing levels of uncertainty in the option markets.

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We will also explore the differences between affiliates and introducing brokers further, and look at some tips for new IBs entering the market. They provide their clients with trading education and support, as well as access to the financial markets. An introducing broker introduces the client to a clearing broker.

Under the rule, a broker-dealer must have possession or control of all fully-paid or excess margin securities held for the account of customers, and determine daily that it is in compliance with this requirement. The broker-dealer must also make periodic computations to determine how much money it is holding that is either customer money or obtained from the use of customer securities. If this amount exceeds the amount that it is owed by customers or by other broker-dealers relating to customer transactions, the broker-dealer must deposit the excess into a special reserve bank account for the exclusive benefit of customers.

Formal guidance may be sought through a written inquiry that is consistent with the SEC’s guidelines for no-action, interpretive, and exemptive requests. In 2002, Interactive Brokers, along with the Bourse de Montréal and the Boston Stock Exchange, created the Boston Options Exchange. Also in 2002, IB introduced Mobile Trader and an application programming interface for customers and developers to integrate their mobile phone systems with the IB trading system. Also in 2002, Timber Hill became the major market maker for the newly introduced U.S. single-stock futures.

The clearing broker handles the trade and manages the account. In contrast, an executing broker processes buy orders and sell orders. Introducing Brokers is a company or an individual that refers clients to the trading floor. Many IBs are one-person operations, while others are larger, multi-location businesses.