What's the use of an "introducing broker for Interactive Brokers"

First Time Investing šŸŽ“
1

Whilst looking for a good broker, I saw Interactive Brokers amongst the recommendations, but a few otehr brokers like Mexem and Lynx are descibed in the review as ā€œintroducing broker for Interactive Brokersā€. What exactly does that mean?

I saw that Lynx has a lot of educational materials and a good helpdesk, but other than that, which reasons could a person have to choose some intermediate party over directly opening an account with Interactive Brokers?

To me it seems like that would just complicate matters, but maybe there are other advantages that I am unaware of.

2

Hi there,

Thanks for reaching out. An ā€œintroducing brokerā€ (IB) like Mexem or Lynx is essentially a partner company that brings clients to a larger brokerage, such as Interactive Brokers (IBKR), in exchange for a share of the revenue generated by those clients. They act as intermediaries but often offer additional services tailored to specific types of traders or investors.

Choosing an introducing broker over opening directly with Interactive Brokers might seem unnecessary at first, but there are a few potential advantages:

  1. Simplified Onboarding Process: Some introducing brokers streamline the account setup process, making it more user-friendly than IBKRā€™s sometimes complex procedures.
  2. Localized Support: Introducing brokers often provide support in the clientā€™s native language or offer better customer service tailored to specific regions.
  3. Educational Resources: As you mentioned, Lynx provides a wide range of educational materials and guidance, which can be invaluable for beginners or those looking to expand their trading knowledge.
  4. Additional Tools or Services: Introducing brokers may offer proprietary tools, research, or trading platforms that complement IBKRā€™s offerings.
  5. Lower Minimums or Fees: Some introducing brokers negotiate fee structures or deposit minimums that might be more attractive than Interactive Brokersā€™ standard terms.

However, going through an introducing broker can sometimes result in higher costs, as they might charge their own fees on top of IBKRā€™s. Additionally, there could be limitations in accessing certain features directly through the Interactive Brokers platform.

If you donā€™t need extra hand-holding or specialized services, opening an account directly with IBKR might indeed be simpler and more cost-effective. But for traders who value added support and education, an introducing broker could make the experience more accessible and tailored. Itā€™s completely up to your preference.

I hope this helps.

Best,
Andris

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