An Introducing broker, is a broker dealer who introduces customer accounts to a clearing broker dealer. The introducing broker dealer does not hold (provide safekeeping for) customer assets or settle trades with counterparties. The introducing broker contracts the services of a clearing firm or carrying broker dealer to provide these functions.
Applying "Introducing Broker" to Securities Exams:
Many broker dealer do not self clear or carry customer accounts. Carrying customer accounts and clearing customer trades requires a large amount of infrastructure and capital to perform these functions. Most small and medium size broker dealers find it easier to contract a general securities (clearing) broker dealer to provide these services for them. The introducing broker dealer will send all cash and securities to the clearing broker dealer. The clearing broker dealer will maintain all of the customer accounts, clear all trades and in most cases, will send the customers confirmations and statements. A broker dealer who introduces all of its customer accounts on a fully disclosed basis will not be required to send the customer confirmations and statements, this will all be done by the clearing broker dealer. If the introducing broker maintains an omnibus account at the clearing firm, the introducing broker will be required to send customer confirmations and statements. In order to pass the series 24 or series 26 exam you must have a comprehensive understanding of the roles of the introducing and clearing broker dealers and their net capital requirements. All of this information is covered completely in our series 24 and series 26 exam prep software, textbooks and video training classes. Make sure you are ready to pass your exam with our Greenlight exam pass guarantee.