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| Independent Introducing Broker |
An independent introducing broker (IIB) is a legal entity or an individual that offers futures market brokerage services. An IIB has to be a member of the National Futures Association (NFA), which is responsible for registration and general supervision, and it must be registered with the Commodity Futures Trading Commission (CFTC) to whose regulation it is subject. Furthermore, IIBs are subject to the regulation of the respective commodity exchanges.
An IIB takes customer orders and transmits them to any futures commission merchant (FCM) for handling. This means that, in contrast to a guaranteed introducing broker (GIB), an IIB’s activities are not tied to a specific FCM.
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While an FCM is able to mitigate the counterparty risk by, for example, obligating the customer to pay and maintain a margin deposit, an IIB does not accept any collateral, regardless whether it includes money, securities, or property.
In contrast to a GIB whose operations are guaranteed by an FCM, an IIB has to take on responsibility for its operations. Therefore, an IIB has to raise its own capital to meet the minimum capital requirements that are determined by the CFTC and by the NFA. In addition, an IIB has to provide minimum financial reporting on a semiannual basis.
