Commission models

Brokers pay introducing brokers in several ways, and the details of an agreement matter far more than the headline rate. This lesson explains the four common models and works through an illustrative calculation.

Important: every figure in this lesson is illustrative. Real commission depends on your broker's terms and on your referred clients' actual trading, and it can be zero.

1. Per-lot rebate

The broker pays you a fixed amount for each lot your referred clients trade. It is usually quoted per standard lot (100,000 units), and smaller trades count proportionally: 1 mini lot is 0.1 of a standard lot and 1 micro lot is 0.01.

Check whether the rate is per side (opening or closing counted separately) or per round turn (open and close together). A rate of 2 USD per side is the same as 4 USD per round turn.

Rebates usually come out of the broker's share of revenue, so they do not have to change what the client pays — but confirm that with the broker.

2. Spread mark-up

Here the broker lets you add extra pips to the spread your clients pay, and you receive that extra amount. On EUR/USD, where 1 pip on 1 standard lot is 10 USD, a mark-up of 0.5 pips means:

• 0.5 × 10 = 5 USD more in cost for the client on every standard lot

This model increases your clients' trading costs directly. If you use it, tell clients clearly and consider whether the extra cost is fair.

3. Revenue share

You receive a percentage of the net revenue the broker earns from your referred clients. The key question is how "net revenue" is defined. If it includes money the broker makes when clients lose — as can happen when a broker acts as counterparty to client trades — then your income rises when your clients lose. That is a serious conflict of interest, and many careful IBs avoid such arrangements.

4. Cost per acquisition (CPA)

You receive a one-off fixed fee for each referred client who meets conditions such as a minimum deposit and a minimum amount of trading within a set period. There is no ongoing income from that client afterwards. CPA can create pressure to sign people up regardless of whether trading suits them, so treat it with care.

Some brokers combine models — for example, a smaller per-lot rebate plus a CPA.

Tiers

Many per-lot agreements use tiers: the rate rises with your clients' total monthly volume. For example:

Worked example (illustrative)

Five referred clients trade the following volumes in one month:

The working: 12.5 + 0 + 30 + 4.5 + 18 = 65 lots. That falls in the middle tier.

How much you earn depends on how the tiers are applied, which you must check in the agreement:

• Whole-volume tiers — the tier rate applies to all lots: 65 × 4 = 260 USD.
• Marginal tiers — each band is paid at its own rate: the first 50 lots at 3 USD = 150 USD, plus the next 15 lots at 4 USD = 60 USD, giving 150 + 60 = 210 USD.

Same clients, same trading, a 50 USD difference purely from the wording.

Now compare a spread mark-up of 0.5 pips on the same 65 lots of EUR/USD: 65 × 5 = 325 USD. That looks higher for the IB, but every dollar of it is an extra cost paid by the clients.

Notice client B: no trading, no commission. If none of the five had traded, the total would be zero.

Why commission can be zero — or lower than expected

• Clients may open accounts but never deposit or trade.
• Some instruments or account types may pay a lower rate or none at all.
• Agreements often include minimum payout thresholds, so small balances roll over.
• Brokers usually reserve the right to withhold or reverse commission linked to abuse, such as very short-lived trades designed only to generate rebates, or accounts that fail identity checks.

Questions to ask before you sign

1. Is the rate per side or per round turn, and per standard lot?
2. Are tiers applied to the whole volume or marginally?
3. Does my commission increase the client's costs?
4. For revenue share: is "net revenue" linked to client losses?
5. When and how am I paid, and what are the minimum thresholds?
6. In what circumstances can commission be withheld or clawed back?

Key takeaways

• The four common models are per-lot rebates, spread mark-ups, revenue share and CPA; hybrids are common.
• Spread mark-ups raise clients' costs, and revenue share can link your income to client losses — both need careful thought and clear disclosure.
• Tier wording matters: whole-volume and marginal tiers can pay different amounts for identical trading.
• All examples here are illustrative; real commission depends on actual client trading and broker terms, and can be zero.