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What does an Introducing Broker do?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 03 November 2016
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An introducing broker is a person who interacts directly with customers who are interested in trading securities. The broker may not execute trades on behalf of customers. Instead, he or she takes orders, provides advice, and handles problems that come up. They delegate the trades themselves to futures commissions merchants who work on the trading floor. The merchant works to get the best deal on behalf of the client.

Introducing brokers could be thought of as customer relations specialists. Some work for large firms, delegating trades to another department in the firm. Others work on their own and partner with a futures commission merchant who accepts commissions from many different brokers and firms. Different skills are required for networking with customers and executing trades on the floor, and splitting these tasks between two different financial professionals can be beneficial for everyone involved.

The introducing broker meets with clients, accepts orders, and passes them on to the futures commission merchant. Introducing brokers do not actually handle cash or securities and the client sends these under separate cover to the merchant the broker works with. When customers want to place orders, the introducing broker passes the orders on to the futures merchant. Introducing brokers also pass along benefits such as rebates and promotional materials to their clients.

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One advantage to working with an introducing broker is that because all of the broker's accounts are pooled, clients have much more clout than they would on their own. Futures commission merchants are eager to resolve problems and disputes to avoid losing a lucrative account. In addition, being part of a group provides clients with access to bonuses for bulk trades and other special benefits that would not otherwise be available.

In order to serve as an introducing broker, it may be necessary to have training and a license, depending on where someone is working. People may start out working for firms that pay for their training and licensing so that they can get work experience while they are training. Once a level of competency is achieved, an introducing broker can consider working independently. Some brokers may retain relationships with their old firms by working with their futures merchants and steering clients their way.

This career is suitable for people who are interested in securities and good with managing customers. Introducing brokers work with a wide variety of clients and must be innovative when it comes to services and account options so that they can attract and retain customers.

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