An Introducing broker is a simple form of business partnership between a company, an individual and primary broker. The main role of an Introducing broker is to search for and find clients for a primary broker and take a commission for the services rendered. The referrals process through which the Introducing broker undertakes and gives a primary broker new clients is done in many ways, but it is not a simple job. A successful Introducing broker business will have to built on a strong foundation of a large network of contacts all of who can trust the IB in addition to a good command and pull on the trading floor.
Any good Introducing broker will have to have or will typically have or be part of:
Investment and/or brokerage firms that already have a sizable client base.
Financial websites, signal services, trading rooms, forums or discussion boards that have a steady flow of visitor traffic
Forex traders, individuals and companies that are willing and have the resources as well as manpower to start off and put in a good amount of work and effort in building up the business.
How Introducing broker businesses work
The process is fairly simple, yet layered enough to require formidable skills in the market. There are two main ways in which an Introducing broker can be paid. Firstly, a client is introduced to a broker who the uses a given code to open an account. The other way is a direct referral where the clients mention the Introducing broker to the Primary broker. A commission is paid either way.
There are also different ways and reasons through which the Introducing broker can be paid, the commission structure, as it is known, can be a flat fee, the IB gets paid an amount for every client introduced. Most brokers charge between $50 and $400 and the payment can come through depending on the terms and conditions set by the Primary broker. Another, more popular way in which Introducing brokers can get paid is to get a small percentage of every deal settled for as long as the client remains with the Primary broker.
A White Label is considered to be on a stage higher than an Introducing Broker. White Labels are programs that is designed to suit only experienced and highly qualified persons or companies that want to start up a new FOREX brokerage company or brand in the industry. According to the NFA manual a White Label is defined as the practice of renting/leasing the rights to have the lessee's credentials and platforms as another's and passing every subsequent trade via the lessor. Most White Label agreements will allow the lessee's customers to be completely unaware of the fact that the real owner of the platform and operations is, in fact a completely different company.
Advantages of a White Label
Cost effective: Building a trading platform can be highly expensive, with an existing platform, only a few tweaks need to be made before a completely new brand can be created. There will also be a large chunk of savings when the start ups need licenses and business models to function.
Time saving: A new business can be set up with little time, if it is an online trader, there is a minimal time delay and it can be ready to service clients almost immediately.
Support: Trading systems require heavy support for updates and technical support. Also the new system will have to be stable, that takes time in testing, which again requires time and money.
Experience: A White Label allows even small start ups to handle its own clients, this kind of first hand experience is invaluable and cannot be taught. Also, it is, for all intents and purposes a separate entity; there is the satisfaction and feeling of owning and operating a brokerage firm instead of only referrals.
Running a White Label firm is almost the same as running an independent brokerage firm. You will have your own website and the clients will all be yours. After establishing the business, you can build and migrate to your own platform over time.
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