Guaranteed And Independent IBs
The Futures Trading Practices Act of 1982 created introducing brokers (IBs) as a new class of CFTC registrant. IBs generally were independent entities that solicited and accepted customer orders, but used the services of FCMs for clearing, recordkeeping and retaining customer funds. In response to industry concern that most brokers required to register as IBs would be unable to meet net capital requirement (described below), the CFTC permits any IB to satisfy its capital requirement by entering into a guarantee agreement with an FCM, through which the "guarantor FCM" undertakes to assure that the IB will perform its obligations.

A newly registered AP, such as someone who has recently passed the Series 3, may very well end up taking orders for an IB as an entry-level job. As such, it is important that those taking the test understand that the IB cannot accept customer funds in its own name. Regulations stipulate that an IB may not accept money, securities or property from customers, except for checks made payable to the FCM. Such payments must either be deposited immediately in a qualifying bank account or mailed immediately to the FCM.



Net Capital Requirements

Related Articles
  1. Investing

    The Series 3 Exam: Creating A Career With Commodities

    The Series 3 exam is the quickest way to diversify sales and add futures to your investing options.
  2. Trading

    Broker Summary: Interactive Brokers

    Learn more about IB, an online broker specializing in routing orders and executing and processing trades on more than 90 electronic exchanges and trading venues worldwide.
  3. Trading

    Creating Automated Trading Systems Using Interactive Brokers

    Learn how to use this automated global electronic market maker and broker.
Frequently Asked Questions
  1. What are the Major Differences Between a Monopoly and an Oligopoly?

    The major differences between a monopoly and an oligopoly include the number of firms in the market, type of barriers to ...
  2. What's the difference between Google's GOOG and GOOGL stock tickers?

    Learn the difference between Google's GOOG and GOOGL ticker symbols. Splitting shares into classes prevents management from ...
  3. What is the difference between overdraft and cash credit?

    The primary differences between overdraft and cash credit lie in how they are secured and whether the money is lent out of ...
  4. What does a Chief Financial Officer (CFO) do?

    A CFO is responsible for reporting accurate financial information of the company, investing the company's money, and identifying ...
Trading Center