Introducing Brokers

Forex broker related topics and discussions

Introducing Brokers

Postby User » Thu Jul 09, 2009 8:47 pm

Forum transfer: Submitted by K_Matrix on April 13, 2009 - 20:31.

Hi Everyone,

I'm new to live forex trading. I'm a little confused about introducing brokers. I registered with Fastbrokers.com, they are introducing brokers to FXDD.com. So when I opened an account with FXDD, I saw this in the customer agreement:

"
15. INTRODUCING BROKERS RESPONSIBILITY TO FXDD AND TO THEIR CLIENTS
Introducing Brokers have certain responsibilities to their introduced clients and to FXDD with respect to their introduced accounts, including, without limitation: (1) communicating with their introduced clients regarding their respective investment objectives and investment opportunities given those objectives; (2) complying with all legal requirements, rules and regulations applicable to the introducing broker; (3) complying with all legal requirements, rules and regulations applicable to their introduced clients; and (4) determining any commission structure and communicating the structure to the introduced clients.

The Introducing Broker will not be responsible for: (1) Opening the introduced client's Account including, but not limiting to approving, servicing and monitoring Customer's Accounts(s) and obtaining and verifying account information as is required by the law and regulation, (2) Collecting funds from the clients for the purpose of facilitating margin Foreign Exchange trading or satisfying margin requirements; (3). Executing transactions or accepting orders for the Customer's Account(s), or performing any action that would cause or appear to cause a change in Customer's position or Account Value, including but not limited to rolling over spot positions, liquidating positions, paying interest, requiring margin, or accepting additional funds or paying out funds to the Customer; (4) Providing any account statements to the Customers; (5) Responding to complaints or inquiries.

"


But at fastbrokers, there is a service there to withdraw or fund my account. Isn't that against what is stated in the customer agreement with FXDD?

I'm not sure if i misunderstood the responsibilities of an IB, or did I just registered with a scam broker.


I hope someone can help,

thanks in advance to Edward and the team, this website has been my learning ground for the last 1 year.

K_Matrix
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Re: Introducing Brokers

Postby User » Thu Jul 09, 2009 8:47 pm

Forum transfer: Submitted by Timur on April 13, 2009 - 21:38.

Hi K_Matrix,

You haven't registered with a scam broker, definitely.
Fastbrokers are simply and IB (introducing broker) for FXDD.

Many brokers nowadays operate as IBs for other companies.

An introducing broker is a referrer, who sends all clients to its primary broker, in your case Fastbrokers sends clients to FXDD.

For sending clients, an IB earns its commission.
A client gets all services, guarantees and benefits of trading with a primary broker, while his account remains linked to an IB.

One thing you have to check is that when you trade with Fastbrokers (an IB) you do have the same spread quotes as client who trades with FXDD (a primary broker).
The reason for that is IB's commission: an IB can sometimes have an option to increase its clients' spreads in order to earn own commission. Alternatively, a primary broker can pay a commission to IBs without increasing clients' spreads.

Other than that, you'll be fine with an IB. If you have any concerns, you try can asking FXDD to free you from dependence of Fastbrokers, so that you'll be come a direct FXDD client.

Hope this helps,

Timur
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Re: Introducing Brokers

Postby User » Thu Jul 09, 2009 8:47 pm

Forum transfer: Submitted by K_Matrix on April 14, 2009 - 06:41.

Thanks Timur for the clarification.

I'll stay with Fastbrokers for now as they give quite a good service. Time will tell.

K_Matrix.
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Re: Introducing Brokers

Postby Joe T » Tue Aug 04, 2009 4:57 pm

If you buy insurance from a company that uses independent agents, you are paying for the commission of that agent in your premium. The agent doesn't handle insurance functions, but can provide more personalized customer service on your behalf, and that's why you are paying a little extra. The company just earned premium because of the agent's work, and thus is willing to give the agent a slice of the pie. If you buy insurance direct from a company, you save some money, but you are dealing with whomever is on the other end of the line when you need questions answered or claims filed.

Some companies service direct customers quite well and it may not be worth the extra money you give to an agent.

Similarly, there is nothing wrong with an Introducing Broker, in concept, from what i understand. I've looked into this a bit over the last few months (only been trading a few months) because I set up an account through ForexMeta, an Introducing Broker for FXDD. To be honest, I did it without really knowing what the heck I was doing. To date, I've had no particular issues with the service of FM, but on the other hand I haven't exactly been all that demanding. They add a pip to the spread on all the quotes from FXDD.

I understand the business relationships involved, so I sent an e-mail to FXDD asking for guidance on what the obligations are on their side to FM, and how I might go about dealing with them directly. It's likely that they are not allowed to solicit FM users directly. The carefully worded e-mail eventually answered the question that there is no particular obligation, and if I wish to make that move I can contact their sales area, though the same e-mail in no way discouraged me from using FM.

For the time being, I'm sticking with FM, at least until I can get some consistent success in trading. If and when that happens, the lot sizes will increase, and the extra pip will mean more to me. So, for now, I'm paying for the convenience of simply not messing with changing my platform and all that.

Another consideration some people have mentioned is that the IB does introduce yet another party into the mix as far as potential stop-hunting, since they may be taking opposing positions. I've seen no evidence of that with FM, and have no basis to suggest it is happening.

Eventually, I'll likely go FXDD direct. I'll probably give FM a year, since I have this old-fashioned sense of obligation to not just hop around over a buck or two. That said, the pips do add up over time, so it sin't a silly thought to look for a better spread. But if you're not winning your trades anyway, the spread won't be the reason you drain your account (unless you're scalping, I suppose, where spread is pretty important).
Joe T
 
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