# Understanding Introducing Brokers (IB): Roles, Registration & Responsibilities

## What Is an Introducing Broker?

An introducing broker (IB) is a registered intermediary in the [futures markets](https://www.investopedia.com/terms/f/futuresmarket.asp) who works directly with clients to provide and manage their accounts but leaves the actual trade execution to a [futures commission merchant](https://www.investopedia.com/terms/f/fcm.asp) (FCM). IBs focus on building client relationships and guiding trading strategies, while FCMs handle the technical side of placing and clearing trades.

In the U.S., IBs must register with the Commodity Futures Trading Commission (FTC) and are regulated by the National Futures Association (NFA), ensuring they operate within established industry standards.

This division of responsibilities allows IBs to serve as trusted advisers while relying on FCMs for trade execution and back-office support.

The introducing broker might work for a company that partners with or is a subsidiary of the commission merchant's firm.

### Key Takeaways

*   An introducing broker (IB) advises clients in futures markets but delegates trade executions to futures commission merchants (FCMs).
*   IBs focus on client relationships, while FCMs handle transactions and back-office operations.
*   The IB and FCMs share fees and commissions, optimizing resources through specialization.
*   Futures IBs register with the Commodity Futures Trading Commission (CFTC) and are regulated by the National Futures Association (NFA).
*   Introducing brokers enable futures commission merchants to offer local services without the overhead of storefronts.

## Introducing Broker (IB): Key Functions and Responsibilities

An introducing broker acts as a middleman, matching an individual or a company seeking access to the futures markets with a futures commission merchant who will take on the responsibilities of making the trade and handling the back-office operations.

Generally speaking, IBs make recommendations while the commission merchant executes the trade. The introducing broker and the broker who executes the transaction split the fees and [commissions](https://www.investopedia.com/terms/c/commission.asp).

Introducing brokers play the same role in the futures markets as stock brokers do in the equities markets. However, they are regulated by different authorities. Stock brokers are registered with the [Securities and Exchange Commission](https://www.investopedia.com/terms/s/sec.asp) (SEC) and are regulated by the [Financial Industry Regulatory Authority](https://www.investopedia.com/terms/f/finra.asp) (FINRA). Futures introducing brokers are registered with the [Commodity Futures Trading Commission](https://www.investopedia.com/terms/c/cftc.asp) (CFTC) and regulated by the [National Futures Association](https://www.investopedia.com/terms/n/nfa.asp) (NFA).

This arrangement allows for specialization, with the IB focusing on the client while the FCM focuses on trading floor operations.

Today's FCMs provide [trading platforms](https://www.investopedia.com/terms/t/trading-platform.asp) on which clients can place [trades](https://www.investopedia.com/terms/t/trade.asp) online and take responsibility for account management. However, it would not be financially feasible for an FCM to open storefronts across the country to serve their customers. IBs can provide that local service.

## How Introducing Brokers (IBs) Work with Futures Commission Merchants (FCMs)

Many IBs are solo operations, but some are larger with multiple locations. In any case, their primary goal is customer service. Outsourcing the prospecting and servicing of clients to the IBs creates [economies of scale](https://www.investopedia.com/terms/e/economiesofscale.asp) for FCMs and the futures industry.

Most IBs prefer to outsource trading because it frees them of the substantial overhead involved in executing trades, maintaining accounts, and handling financial reporting responsibilities.

IBs allow FCMs to do business on a local basis while using the FCM's [infrastructure](https://www.investopedia.com/terms/i/infrastructure.asp) for trading.

## What Is the Futures Market?

The [futures market](https://www.investopedia.com/terms/f/futures.asp) is the exchange in which traders buy and sell [derivative](https://www.investopedia.com/terms/d/derivative.asp) financial contracts. These are agreements to buy or sell a specific commodity or financial instrument at a specific price and date. The price is locked in, and the buyer will gain or lose depending on the market price when the contract reaches maturity.

Futures have long had a role in the markets for major physical commodities such as crude oil, gold, and wheat. Producers and buyers in volatile industries obtain reasonable prices in advance. Traders may be seeking a hedge against possible losses or making a speculative bet on the direction of commodity prices.

There are also futures markets for stocks, indexes, and currencies, among others.

## Who Needs an Introducing Broker?

An introducing broker is a financial adviser who specializes in futures investing. An investor who is interested in futures but not inclined to dive in alone would consult with an introducing broker.

Futures investing is relatively risky and relatively complex, even compared to stock investing. Anyone determined to participate directly should have a good understanding of the ins and outs of futures trading before jumping into it.

## How Much Money Do I Need to Trade Futures?

Many platforms for futures traders require a minimum deposit of $5,000 to $10,000 to get started. Trading futures also requires margin deposits that can range from as little as $300 to more than $7,000 depending on the type of commodity being traded and the amount of the contract.

Keep in mind that a margin account is a type of collateral required in return for borrowing cash from the broker to finance trading. The collateral could disappear with a losing investment.

## Final Thoughts on the Role of Introducing Brokers in Futures Trading

Introducing brokers (IBs) play an important middleman role in the futures market, much like stockbrokers do in the equities market. They focus on advising clients and maintaining relationships, while futures commission merchants (FCMs) handle trade execution and back-office operations. IBs are registered with the Commodity Futures Trading Commission (CFTC) and regulated by the National Futures Association (NFA), which helps ensure compliance and professionalism.

By partnering with FCMs, IBs can offer personalized, localized services while leveraging the FCMs' infrastructure and scale. For investors, especially those new to the futures market, IBs provide valuable guidance and support, though it's important to understand the significant capital requirements and complexities involved in futures trading.

> **Article Sources**
>
> 1.  FINRA. "[Registered Financial Professionals](https://www.finra.org/investors/learn-to-invest/choosing-investment-professional/registered-financial-professionals)."
>     
> 2.  National Futures Association. "[Introducing Broker (IB) Registration](https://www.nfa.futures.org/registration-membership/who-has-to-register/ib.html)."