Forex Introducing Broker (IB)

A forex introducing broker (“IB”) is a firm that provides any one of a number of different services to forex investors.  Many times the IB will act as an introducing party to a forex dealer/FCM or perhaps the IB is licensing a forex trading system to investors who want to trade for themselves.  Forex IBs can either be “independent” or “guaranteed.” The following is an overview of the requirements for a forex IB to register with the CFTC and become a member of the NFA.
 
Exam Requirements
 
Each principal[] and associated person[] will need to have passed both the Series 3 exam and the Series 34 exam.  Additionally, if there is a branch office [eventually to be linked to terms section], the manager of such branch office will need to have passed the Series 30 exam.
 
Fingerprint Requirements
 
The NFA will require each principal and associated person to provide fingerprint cards which will be run through the FBI databases prior to the registration of such person.  While a felony or misdemeanor will not necessarily disqualify you from registering, it will likely delay the process.  For more information, see [link to the FAQ about this subject].
 
Independent IB
 
Independent IBs are those firms which are independent of any particular forex dealer/FCM and who may introduce to any forex dealer/FCM.  Because such IBs are not guaranteed by a particular forex dealer/FCM, such IBs must  have a $45,000 net capital requirement which must be maintained at all times. 
 
Independent IBs must also complete Form 1-FR-IB (Part A).
 
Guaranteed IB
 
Guaranteed IBs are those firms which have, generally, an exclusive relationship with a particular forex dealer/FCM.  The Guaranteed IB can only introduce clients to the guaranteeing forex dealer/FCM.  Because such IBs are guaranteed by the forex dealer/FCM, such IBs do not have a net capital requirement. 
 
Guaranteed IBs must also complete the guarantee agreement found in Form 1-FR-IB (Part B).
 
AML & BCP
 
Anti-Money Laundering (AML) procedures and Business Continuity Planning (BCP) are two hot button items for NFA review.  The NFA will ask you for all of your policies and procedures regarding these aspects of your business and be prepared to defend them.  While the NFA scrutinizes all forex managers, they scrutinize forex IBs most and this is where many groups will get caught.  You need to make sure that your AML and BCP discussion is clear, accurate and comprehensive.  Additional areas of compliance like ethics training and programs, while not as important during the registration process, will be a central item of importance if the NFA ever conducts an examination of your firm.
 
Other Contracts
 
IBs will usually have other documents or agreements, such as sales or licensing agreements, which may be with either the forex dealer/FCM or with the forex client.  These agreements will need to be drafted or reviewed by experienced counsel. 
 
Costs
 
Firm Application - $200
Principal/ AP Application - $85
Yearly NFA Membership Fee - $750
 
Timing
 
As mentioned above the timing for the forex IB is likely to be longer than for a forex CTA or a forex CPO.  It may take as little as two months or as long as six months or more, depending on a number of items and the exact nature of the IB business.
 
Questions?
 
If you have any questions on the above requirements, please contact us [] and we will get back to you as soon as possible.