Who is the IB in forex, and where does their money come from?
Every forex broker pays somebody to bring clients in. That somebody is the introducing broker, and once you know how they are paid, the rest of this industry stops looking mysterious.
What an introducing broker actually is
An introducing broker, usually shortened to IB, introduces traders to a broker and gets paid a share of what those traders generate. The IB does not hold your money, does not execute your trades and cannot see your password. Your account is opened with the broker, funded at the broker, and closed at the broker.
The only thing that changes is a field on your account recording who introduced you.
Where the commission comes from
This is the part worth slowing down on, because it decides whether a rebate can be real.
On every trade you pay the broker in one of two ways, sometimes both:
- Spread, the gap between the buy price and the sell price
- Commission, a fixed charge per lot on accounts that advertise a raw spread
That payment is the broker's revenue on your trade. The broker then hands a portion of it to whoever introduced you. Nothing is added to your cost to fund this. The share comes out of money you were already paying.
That is why a rebate is not a bonus, a promotion, or a gift. It is a slice of a payment you have already made, sent back to you.
What happens when nobody introduced you
Here is the part most traders never hear.
If your account has no IB attached, the broker does not discount your spread. The share simply stays with the broker. You pay exactly what you would have paid with an IB attached, and the portion that would have been passed on is never passed on.
| Your account | What you pay per trade | Where the IB share goes |
|---|---|---|
| No IB attached | Full spread and commission | Kept by the broker |
| Attached to an IB | Full spread and commission | Paid to the IB |
| Attached to an IB that rebates | Full spread and commission | Paid to the IB, then most of it back to you |
Three accounts, identical trading costs, three different destinations for the same money.
So why does a broker agree to this?
Because it is cheaper than advertising. An IB brings clients who trade, and the broker only pays when those clients actually generate revenue. Compared with buying advertising and hoping, paying a share of realised revenue is a good deal for the broker.
That is the whole mechanism. There is no catch hiding underneath it, and no reason for a broker to resent the arrangement.
What this means for you in practice
Two things follow.
First, the money exists whether or not you claim it. Every lot you trade generates an IB share. The only question is who receives it.
Second, the trading conditions do not change. Spread, leverage, execution and the instrument list are set by the broker and by your account type. Attaching an IB does not touch any of them, because the IB sits on the revenue side of the broker's books, not on the pricing side.
If you want to see what the share is worth on the pairs you actually trade, the [rebate rates for each broker](/brokers) are published per account type, and the [trading calculator](/tools/calculator) works out the figure for your own volume.
Rates change when a broker changes its terms. Read them from the live table rather than from any article, including this one.
Next
- [What is backcom, and who actually pays it](/what-is-backcom)
- [Check whether your account is under an IB](/ib-check)
Next
- [How to tell whether your account has an IB attached](/bai-viet/how-to-check-your-ib)
- [Is a rebate a bonus, or your own money coming back?](/bai-viet/is-a-rebate-a-bonus)
- [Does taking a rebate change your trading conditions?](/bai-viet/does-a-rebate-change-conditions)