Introducing broker commission: per lot, CPA, revenue share and tiers

Four ways a commission agreement can be expressed

An introducing broker can record an agreement as a payment per eligible lot, a payment per qualified client, a percentage of eligible revenue, or a combination. These examples describe arithmetic, not standard market rates. Each broker relationship needs its own signed terms, legal entity and partner-account scope.

The activity base matters as much as the rate. A lot can have a different definition across instruments. A qualified client is not simply a registration. Revenue share must use the revenue base defined by the agreement, with its specified deductions and exclusions.

Whole-volume and marginal tiers produce different answers

Suppose a fictional agreement pays $8 per lot below 100 lots and $10 from 100 lots. With 150 eligible lots, a whole-volume tier applies the reached $10 rate to all 150 lots: $1,500. A marginal tier applies $8 to the first 100 lots and $10 to the next 50: $1,300. The $200 difference comes from the rule, not a rounding error.

Ask whether tiers reset monthly, apply per instrument or account, and use earned, closed or settled volume. Confirm how a threshold boundary is handled. A label such as tier two does not specify the method. IBDock asks you to choose the tier method explicitly when recording a tiered sample agreement.

A rate change needs dated activity

If the per-lot rate changes from $8 to $10 on 16 September, the month's total alone is insufficient. For a flat-rate example with 40 eligible lots before the change and 60 after it, the expected amount is 40 × $8 + 60 × $10 = $920. Dividing the month by calendar days would assume trading activity was evenly distributed.

Keep the two date windows and the underlying records. Tiered agreements need an additional answer: does the volume threshold span the whole month or reset at the version boundary? The current sample Desk deliberately returns a split-activity requirement for a mid-month change; it does not manufacture a prorated result.

Compare the amount retained under the same assumptions

For a flat per-lot scenario, 150 lots at $8 produce $1,200 gross. A 20% sub-partner share of gross is $240. Subtracting $150 of acquisition cost leaves $810 of estimated net. Payment charges, tax and other operating costs are outside that example.

An alternative CPA scenario can also produce $810, but only if the assumed referrals actually qualify. Compare two scenarios using the same period, currency and cost coverage. Do not convert a best-case client count into an earned balance. The public calculator lets you change these inputs and export the assumptions with the result.

Record what the formula cannot establish

A calculated amount is evidence of the inputs and rules you entered. It cannot prove that all activity was supplied, that attribution is correct or that a broker accepted a qualification. Keep calculated expectation, statement-reported commission and cash received as separate measures.

• Legal entity, partner account, currency and period cutoff
• Eligible instruments, lot definition and attribution rules
• Qualification criteria, exclusions and clawback terms
• Rate version, effective date and explicit tier method
• Payment timing, thresholds, fee treatment and evidence references

Continue reading

How to reconcile IB commissions across multiple brokers ↗

Sub-IB commission splits: choose the base and preserve every cent ↗

IB commission payment differences: partial payments, fees and carry-forward ↗