An Introducing Broker (IB) is basically refers to an agent that introduces new customers to a Forex brokerage. He/ She receives a certain amount of fee for referring customers to the broker and this fee could be a certain share of the commission that might a brokerage charge. Just imagine a case where $5 commission is charged from you on a specific trade and it may be required to you to pay half of the amount to the introducing broker.
A lot of brokerages implement IB programs since it's able to reduce the costs involved in getting new customers. In some countries such as the United States, it's a legal rule that Introducing Brokerages must be regulated entities. However in countries like Europe, there is no such requirement, though there is a vetting process and additional identities are verified and confirmed before getting eligible for it.
Advantages of Using An Introducing Broker
Their earnings are based on commissions and this is the reason they want the trades to be successful so that they keep earning the commissions. That means that a lot of IB will offer free gifts to people who have opened accounts under them. These gifts can vary from Expert Advisors, books, trading resources and other materials that keep people trading with them.
Also a lot of IBs provide rebates to their traders. These Introducing Brokers share a certain percentage of a commission they make with the people who create their accounts under them. There are many traders for whom it's a fact that they'd be getting rebates only when they open accounts under an Introducing Broker and these rebates play a significant roles in convincing a lot of traders.
Difference between a Forex Affiliate and an Introducing Broker
There are a number of people who are slightly confused when it comes to the difference between an IB and a forex affiliate. As described earlier, a great amount of information is provided to Introducing Brokers regarding the referrals and they are normally expected to build a strong relationship with people who signed under them. On the other hand, an affiliate is the one who receives less detail regarding the activities performed by people who signed under them. This clearly indicates that the Introducing Brokerage is the one that fosters the relationships with clients and affiliate is the one who simply attracts businesses. This also signifies that it is really easy to become an affiliate than an Introducing Brokerage.