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4 Key Differences Between White Label and Introducing Brokers

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  • Digital Team 

Trading in the financial market has developed vastly compared to previous years, with an increased number of service providers making money from the huge number of traders and investors.

This makes it more accessible for new brokerage firms to enter the market and serve a niche target market. Besides providing typical brokerage services, entities are now emerging to offer white label technologies or act as introducing brokers. So, WL or IB?

These intermediaries are known for increasing the broker’s access to tradable assets and end-users. Let’s explain the difference between these two operators and which model suits your business.

Understanding White Label Brokers

White labelling is a business model that entails providing pre-built software and programs that can be easily adjustable and rebranded to the end-user (brokerage) requirements. FX brokers deal with white label providers to shorten their entry time to the market.

Using a white label brokerage, you can acquire an already-built trading software that you can customise according to your business requirements, such as payment systems, trading markets, financial instruments, margin trading, leverage and more.

Building these systems from scratch with internal teams requires more time, especially if you don’t have an experienced in-house developers team. The process of hiring, training and assigning teams to program and develop trading software from the ground up is time-consuming.

Alternatively, you can find a reliable white label provider that builds the trading system for you with the features and specifications you need. In exchange, the developer will charge different fees according to the software’s complexity and level of flexibility.

Understanding Introducing Brokers

Introducing brokers are entities that connect brokerage firms with investors and users who can register at your trading platform and become your clients.

Thus, IBs bear the responsibility of marketing and reaching out to institutional investors and traders, offering your trading products and services and encouraging your target market to register at your website and start trading.

In exchange for increasing your user base, introducing brokers charge commission fees, such as fixed fees per every registered client or a spread-based compensation, depending on the invested volume.

The introducing broker does not participate in making trading decisions or the way FX brokers operate and the offered currency pairs. Their role is limited to connecting the brokerage firm to new clients and tracking their performance and bonus system.

Introducing Brokers vs White Label Brokers

Both models play a major role in accelerating the brokerage firm’s operations and accessibility to the market, allowing them to improve their reach and serve more investors. Let’s compare the way white labelling and introducing brokers work. 

Business Model

Introducing brokers work by connecting institutional investors and traders to the brokerage firms, earning commissions per every introduced client and assisting investors in expanding their financial investments.

On the other hand, white label brokers provide technological solutions, such as platforms and trading systems that can be customised and branded to the end broker’s requirements.

Operating Software and Technology

Turnkey solution providers work with complex technologies, including developing, setting up and maintaining trading systems, payment gateways, emailing services, investment options, market access and more.

Therefore, WL brokers entail a high level of tech expertise and accountability.

Conversely, Introducing Brokers rely on communication and networking capabilities to find and add new clients to the broker’s website. IBs utilise the broker’s systems and technology to offer them to new clients.

Flexibility and Scalability

Forex white label services are highly flexible and customisable to the specific business need of the broker, accommodating the scalability changes if the provider increases or decreases the bandwidth of their services.

On the other hand, IBs are limited to the service package and trading products offered by the brokerage firm. Thus, the only scalability option for IBs is expanding their networking of newly introduced traders and investors.

Associated Fees

Turnkey solution providers charge fees in advance, which change according to the specifications and features required by the brokerage firm. Additionally, WL providers offer different pricing plans that suit brokers with different budgets and objectives.

On the other hand, IBs follow a commission scheme in agreement with the brokerage firm, according to the number of registered investors or how much they spend in trading.

Conclusion

White labels and introducing brokers are two business entities that contribute to the success of FX brokerage platforms, facilitating their reach to new clients and offering them technological solutions.

The white label model entails providing trading software, payment systems and other support services, while IBs help facilitate the communication between the brokerage firms and end users.

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