Various roles exist in the forex trading and financial market to facilitate customers with trading and trading transactions, including the roles of executing broker and introducing broker. Each of these brokers plays a unique role in the ecosystem of financial markets.
Read on to learn more about the potential differences between an introducing broker and an executing broker.
Introducing Broker – An Overview
Starting with the introducing broker, the primary role of an IB is client acquisition. In other words, an introducing broker finds potential clients and helps them get on board with the brokerage firm. An introducing broker must align with the ethical standards and regulations of trading and relationship management. Often, an introducing broker provides support, customer service, and personalized guidance to their clients.
An introducing broker refers new clients to the larger brokerage firms. It is not the job of an introducing broker to manage the account of the client and handle their trade executions. This aspect illustrates the limited involvement of introducing brokers as they do not participate in trade executions or maintain client assets.
Executing Broker – An Overview
Compared to an introducing broker, the role of an executing broker is about buying and selling trading orders in the market on behalf of clients. Executing brokers have direct access to trading exchanges and liquidity providers as they have the custody of managing and holding the assets of their clients. Everything is handled and maintained in compliance with the regulatory aspects of trading by executing brokers.
Executing brokers charge fees, such as clearing fees, for their services. Their potential commissions are included in the fees they charge. You get the point: an executing broker handles the actual purchases and deliveries for their clients. On the other hand, an introducing broker is all about efficient customer relationships instead of transactions.
Introducing Broker vs. Execution Broker: Earning Potential
When it comes to the earning potential of an introducing broker in comparison to that of an execution broker, the limited involvement of the introducing broker means they earn commissions based on the trading volume of their onboarded clients. If you are intrigued to become an introducing broker, you might want to participate in the forex introducing broker programs and polish your skills to kickstart your IB career.
Compared to the introducing broker, an executing broker executes trades on behalf of clients.
Since an execution broker specializes in buying and selling for their respective clients, they have direct access to trade exchanges and liquidity providers. The compensation of execution brokers is based on a percentage of the spread, transaction fee, and other financial charges linked with the trade.
Choosing between Becoming an IB or AB
Now you know that both introducing brokers and executing brokers play various roles in the financial market. While introducing brokers act as intermediaries and provide consultation, personalized guides, and support to clients, executing brokers exclusively specialize in the execution of trades on behalf of those clients. Executing brokers can also collaborate with introducing brokers to improve the trading experience of their respective clients.
