Forex Introducing Broker

Bart Mallon asked:

Overview on Forex Introducing Brokers

With the passage of the Farm Bill in the early part of 2008 Congress required the future registration of many of firms in the off-exchange foreign currency (spot forex) markets. Included in the group of firms and managers who will be required to be registered under the new forex regulatory regime are those firms which act as Forex Introducing Brokers.

Background on Registration

As mentioned above forex firms will need to register soon. The Commodities Futures Trading Commission (CFTC) is charged with creating the forex registration rules and the National Futures Association (NFA) is charged with overseeing compliance and implementing the new rules. While the CFTC has not yet released proposed rules (there will be a comment period before any rules are actually implemented), the NFA has already begun the process of updating its systems and training staff to handle the new regulatory regime. In fact, the NFA has provided much of the public information on the what the rules may look like when passed.

Definition of a Forex Introducing Broker

The definition of a forex introducing broker (also known as a forex IB) is similar to a regular introducing broker, except that the forex introducing broker will introduce clients (generally managers and other introducing brokers) to forex dealer members (also known as FDMs) which are the firms which actually execute the off-exchange forex trading. [Note: the term forex dealer member is given to those firms which are registered with the CFTC as futures commission merchants and who only engage in off-exchange foreign currency transactions.] The Forex IB can be either an individual or a firm; each individual person of a firm will also deemed to be a Forex Associated Person (also known as a Forex AP). Both firms and individuals will need to through the registration process with the CFTC through the NFA.

How to Register as a Forex IB

As we noted above the registration rules have not yet been finalized so we do currently know the exact method of registration. However, the NFA has indicated that the registration process for Forex IBs will be substantially similar to a regular introducing broker. In most instances the firm will need to file a Form 7-R (for the firm) and a Form 8-R (for each owner and associate at the firm – ministerial type individuals will not need to register). Each person will also need to have passed various regulatory proficiency exams. The NFA has indicated that Forex APs will need to have passed both the Series 3 exam as well as a new exam called the Series 34 exam which will focus solely on the off-exchange foreign currency markets. Assuming that all of the above is in order, and all fees have been paid, the forex registration process is likely to take anywhere from 3 to 6 weeks.


Introducing Brokers to FDMs will generally need to be registered as Forex Introducing Brokers after the new forex registration rules go into effect. Firms and individuals who solicit clients on behalf of FDMs should begin thinking about registration and should also start talking to a forex attorney to discuss the best method of proceeding. It is recommend that Forex IBs begin this process early as there will be a rush toward regulation once the rules go into effect.

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