A person or firm that refers clients to a brokerage in exchange for a share of the spread, commission or volume those clients generate.
Many retail futures brands are introducing brokers. They provide the platform, support and pricing, while an fcm behind them holds the money and carries the positions. The arrangement must be disclosed in your account paperwork.
It matters in a failure: your funds sit with the clearing FCM, not the IB you signed up with, and the IB's own risk rules may be tighter than the FCM's.
Example: a discount futures platform advertising $50 day margin is usually an IB whose clearing FCM permits it. If the FCM changes policy, the advertised margin changes overnight.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Margin and leverage. A $5,000 deposit can control a $100,000 position, which is 20:1 leverage. Because the loss is measured on the full $100,000, a 2.5% move against you halves the deposit and brings a margin call, and a 5% move uses all of it.
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