An Introducing Broker is an entity which directs new clients to merchant companies brokerage firm and receives incentives or revenue sharing. IB only needs to introduce the products and services of the merchant companies to its clients while delegating the back office work and trading executions to the merchant. In other words, the merchant companies are close partners of IB.
Running as an IB is a business like any other. To be successful, one requires careful planning, management and knowledge in order to present trading fundamentals and products to clients. Introducing Brokers are somehow one of the essential entities to brokerage firm because sometimes it is not feasible for brokerage firm to just open high expenses offices around the world with just a mere business speculation, this is where IB comes into play. Introducing Brokers can operate their business in any way they want, either it's one-person operation or a group. brokerage firm focuses on executing trades and maintaining the infrastructure of trading and gains revenue by collecting transaction fees from each trade the clients made and this revenue will be shared to IB if the clients are introduced by them.
