Introducing brokers and the spread they add

[Fairman]

Introducing brokers and the spread they add

A lot of retail accounts arrive through introducing brokers, who refer clients and take a share of revenue. That share comes from somewhere: commissions, or a markup added to the spread.

The markup can be invisible. The broker's spread on the platform is already inclusive. An introducing broker may even have a say in it, requesting wider spreads on accounts they bring in so that their cut is larger.

The way to test it is to open a small account directly with the same broker, if possible, and compare spreads and fills at the same times. Different results show what the intermediary layer costs.

It's also fair to ask the introducer how they're compensated. Rebate programs exist where the introducer shares part of their cut back with the client, and some of them reduce the effective cost significantly.

Direct versus introduced: what difference in spread showed up when the two were compared?