Who has to register as an introducing broker?
Under CFTC rules, an introducing broker is a person or firm that solicits or accepts orders for futures, options on futures, retail off-exchange forex or swaps, but does not accept money or other assets from customers to margin those trades. Registered IBs must also be members of the National Futures Association (NFA), the industry's self-regulatory organisation.
Common exemptions
Registration as an IB is generally not required for:
- A person registered and acting as an associated person (AP) of an IB.
- A firm registered as a futures commission merchant (FCM).
- Certain registered commodity pool operators and commodity trading advisors acting within their registration.
- A non-US person or firm with only non-US customers that submits all trades for clearing to an FCM.
Guaranteed vs independent IB
| Guaranteed IB | Independent IB | |
|---|---|---|
| Capital | No minimum of its own: the guarantor takes responsibility | Must maintain minimum adjusted net capital, at least $45,000 (higher in some cases) |
| Financial reporting | No separate financial filings | Files regular financial reports with the NFA |
| Partner firms | Must introduce all accounts to its guarantor FCM or retail forex dealer | Can work with several FCMs |
| Agreement | Signs a guarantee agreement, which either side can end with notice | Signs introducing agreements with each carrying broker |
| Best for | Smaller or newer IBs | Established IBs wanting flexibility |
If a guarantee agreement ends, the IB must find a new guarantor or meet the independent IB requirements, or stop operating as an IB.
The registration process, step by step
- Set up access to NFA's Online Registration System, with a designated security manager.
- Firm application: complete Form 7-R and the NFA membership application, and pay the firm application fee and membership dues.
- Principals and associated persons: each files Form 8-R, submits fingerprints and pays an individual fee.
- Proficiency exams: associated persons generally need the Series 3 (National Commodity Futures Examination). Those dealing in retail forex also need the Series 34. Branch managers need the Series 30.
- Compliance set-up: written supervisory procedures, an anti-money-laundering programme, a business continuity plan, privacy and cybersecurity policies and record keeping.
- Member questionnaire and, for an independent IB, financial statements showing it meets the capital requirement. A guaranteed IB files its signed guarantee agreement.
A forex IB must have at least one principal registered as a forex associated person.
Ongoing obligations
- Supervise staff and keep records.
- Follow NFA rules on promotional material, including standard risk disclosures.
- Complete the annual registration update and pay dues.
- For independent IBs, keep meeting capital requirements and file financial reports.
- Run AML checks and keep training up to date.
How to check a registered IB
Search the firm or person in NFA BASIC (Background Affiliation Status Information Center) on the NFA website. It shows registration status, NFA membership, the firm's guarantor if it is a guaranteed IB, and any regulatory or disciplinary actions.
Outside the US
Most other countries don't have an "introducing broker" registration category. IBs there may need to be authorised, or to work as an appointed representative, tied agent or authorised representative of a licensed firm. See what is an introducing broker for an overview by region.
Frequently asked questions
Does a forex IB need to register with the NFA?
If it solicits or accepts retail off-exchange forex orders from US customers, it generally must register as an IB with the CFTC and join the NFA, with a forex associated person as a principal.
What is the minimum capital for an introducing broker?
An independent IB must keep at least $45,000 in adjusted net capital, and more in some cases. A guaranteed IB has no separate minimum because its guarantor takes responsibility.
What exam does an introducing broker need?
Associated persons generally need the Series 3. Those handling retail forex also need the Series 34.
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