How does a broker know which IB a client belongs to?
Everything rests on one field: the partner stored on the client's record. An introducing broker gets a link or code, the client signs up through it, and the broker's system writes the partner to the client record; trading accounts opened later inherit it. When an outside tracker is involved, the partner should arrive by postback, server to server, not be inferred from a browser cookie weeks later. Write the rules around it into the agreement:
- Two links, one client: first link wins or last link wins, applied to everyone.
- Re-assignment: who may move a client to another IB, on what evidence, with which approver, and from which date commission moves.
- Existing clients: whether someone who already trades with you can be claimed later.
- Client or account: whether attribution sits on the client or on each trading account.
- Leavers: what happens to a partner's clients when the IB resigns, is terminated or fails KYC checks.
On a demo, ask to see one client's attribution history: original partner, every change, approver and the date commission moved.
How are IB payouts calculated from trading data?
A payout is a pipeline, not a month-end spreadsheet. The trading platform is the record of trades; the CRM (customer relationship management system) holds the partner, the agreement and the hierarchy above it.
- 01 Collect closed trades Read closed deals for every attributed account: login, symbol, volume, open and close times, commission and swap. Closed trades give a final volume and a hold time for later checks.
- 02 Apply the agreement Look up the rate for that partner, account type and instrument: an amount per lot, a share of the spread or commission, or a one-off cost per acquisition (CPA) once a funded client meets the activation rule.
- 03 Add overrides Walk up the hierarchy. A master IB earns an override on its sub-IBs' clients under its own agreement; each level gets its own line tied to the same trade, so double counting shows in the data.
- 04 Hold, approve and pay Lines stay pending while qualification and abuse checks run; finance approves the batch, pays, and freezes the statement with the batch reference.
Track360's course on IB fraud illustrates the scale with a worked example: a broker paying $7 per standard lot to an IB network trading 10,000 lots a month pays $70,000 a month in rebates, and if 15% of that volume is artificial, it loses $10,500 a month on one relationship.
Overrides are where margin goes. Track360's lesson on multi-tier cascades notes the broker pays the sum of all tiers on every trade, and recommends at most three tiers for lot-based programmes and a cap on total payout per lot of 60 to 70% of spread revenue. Model the full cascade against your revenue per lot before approving a master IB's deal.
What should a partner statement show, and when can a payout be clawed back?
A partner trusts a payout they can recompute. B2BROKER's guide to setting up an IB programme lists real-time payout ledgers that partners can check themselves, and audit trails of every calculation and payout, among its baseline requirements. A good statement shows:
- Totals per referred account: lots, instrument groups and commission, with client details masked to what the agreement allows.
- Line detail on request: trade time, volume, rate applied and level (own client or sub-IB override).
- Each line's status: pending, approved, paid, voided or clawed back, with the reason.
- The batch reference, payment date and agreement version behind each payout, so a rate change never rewrites history.
Clawback rules say when credited commission is taken back. Track360's lesson on qualification rules gives 14 to 30 days as a typical hold period, with commission voided if the trader fails qualification in that time. Its example holds CPA for 21 days and lot commission for 14, claws back CPA if the trader withdraws everything within 30 days, and warns never to apply clawback rules retroactively to existing agreements.
Which IB fraud patterns should the system catch?
Rebates pay for volume, so volume gets manufactured. On 29 June 2017 the US Commodity Futures Trading Commission (CFTC) ordered a trading firm to pay a $5 million civil penalty after its proprietary traders ran wash trades to earn exchange rebate fees, one evading the firm's own wash-blocking system to trade against himself. IB rebates create the same incentive. Track360's fraud lessons describe these patterns:
| Pattern | What it looks like in the data | Control before payout |
|---|---|---|
| Wash trading | Opposing positions on one instrument, in one account or coordinated accounts. Track360 reads more than 30% of trades with an opposite trade within 10 minutes as a wash pattern; under 5% is healthy. | Link accounts sharing devices, addresses or payment methods; exclude offsetting volume. |
| Correlated wash | Offsetting legs across related pairs such as EUR/USD, EUR/GBP and GBP/USD. | Measure net exposure across linked accounts, not per symbol. |
| Rebate scalping | Average hold times under 60 seconds. | A minimum trade duration; Track360 lists 60 to 120 seconds as typical. |
| Rebate cycling | Deposit, trade for volume, withdraw balance and rebate, repeat. | Hold periods and clawback on early full withdrawal. |
| Extraction | Rebates exceed the referred clients' net trading profit. | Review the partner before approving the batch. |
| Self-referral | The IB trades its own accounts under its own link. | Match partner KYC data against client data. |
| Phantom sub-IBs | Fictitious sub-IBs that claim overrides on the partner's own clients. | KYC on every sub-IB; overrides only above a minimum monthly volume. |
These thresholds are one vendor's starting points: calibrate them on your own clients and keep a person on the approval. Churning is harder: Track360 notes it involves real trading with real market risk, so treat it as a conduct question for compliance.
KYC on partners, and the rules on inducements and disclosure
B2BROKER's guide says IB onboarding should fire the same KYC and anti-money-laundering (AML) workflows as client onboarding, with sanctions and politically exposed person (PEP) screening and a record of where commission income comes from. Pay only to an account or wallet in the verified partner's name, and re-screen before each payout batch.
Rules depend on where the broker is licensed and what the IB does, so treat what follows as questions for counsel. In the EU, Article 24(9) of MiFID II (the Markets in Financial Instruments Directive) treats a firm paying or receiving a fee in connection with an investment service, to or from anyone other than the client or a person acting for the client, as failing its obligations unless the payment is designed to enhance the quality of the service and does not impair its duty to act honestly, fairly and professionally. Its existence, nature and amount, or, where the amount cannot be ascertained, the method of calculating it, must be clearly disclosed to the client before the service. B2BROKER, writing about the US introducing-broker regime, describes a related practice: giving referred clients a document that names the carrying broker and its regulatory status, which identifies the firm but does not disclose the payment.
Where an IB is a tied agent, Article 29 keeps the firm fully and unconditionally responsible for the agent and requires it to make sure the agent discloses the firm it represents. The European Securities and Markets Authority (ESMA) briefing on tied agents of 2 February 2022 expects the firm to receive at least each agent's client numbers, products and financial figures, plus proof that the agent disclosed the firm's name; to deal with complaints about the activities the agent carries out on its behalf; and to be able to end the relationship with immediate effect where that is in clients' interests. On 2 December 2025 ESMA said it and national authorities would run a supervisory action during 2026 on conflicts of interest in distribution, including the possible impact of staff remuneration and inducements on the products offered.
What to ask an IB software vendor
- Which platform fields does the commission engine read, and does it compute on closed trades, open trades or both?
- Can rates differ by partner, account type and instrument group, with every change versioned and dated?
- Can we model the full override cascade against our revenue per lot before approving a master IB?
- Which hold periods, minimum trade durations and clawback rules can we set, and does the statement show which rule voided which line?
- Do partners pass the same KYC, sanctions and PEP checks as clients, and is the payout account matched to them?
- Can we export agreements, client disclosures, partner KYC files and payout batches for a regulator?
Where EntropyX Labs fits
The partner module is part of Brokerage CRM. The referring IB or affiliate is recorded on the client's record at sign-up, and each partner is tracked with tiers, rebate rules and payout tracking alongside the clients it brought in. Per-lot rebates are standard; master and sub-IB override levels, revenue share and CPA are set up to your programme per engagement. Partners log in to see per-trade commission lines and pass the same KYC as clients. The broker sets partner terms and commission schedules. It connects to MetaTrader 5 (MT5); an affiliate platform you already run for paid campaigns is connected per engagement.
EA Panel is the MT5 operations console, with exposure and risk dashboards, interventions with approvals and an audit log, where your desk acts on accounts a partner review has questioned. If you pay partners in stablecoins, partner payouts go out as USDT (Tether) withdrawals through EntropyX PSP, from wallets you control, with keys you hold.
EntropyX Labs does not set partner terms, approve payouts, hold funds or give legal advice, and supplies no liquidity or bridge. Hold periods, clawbacks, minimum trade durations and wash-trading or self-referral flags are configured with you per engagement, to the rules in your partner agreement.
Sources and further reading
- ESMA Interactive Single Rulebook: MiFID II Article 24 (General principles and information to clients) — Read 13 November 2026: Article 24(9): a firm paying or paid a fee or commission by any party except the client, in connection with an investment or ancillary service, is not fulfilling its obligations unless the payment is designed to enhance the quality of the service and does not impair its duty to act honestly, fairly and professionally; existence, nature and amount, or the method of calculating it, must be clearly disclosed to the client before the service
- ESMA Interactive Single Rulebook: MiFID II Article 29 (tied agents) — Read 13 November 2026: the firm remains fully and unconditionally responsible for any action or omission of its tied agent and must ensure the agent discloses the capacity in which it acts and the firm it represents
- ESMA, Supervisory briefing on firms using tied agents in the MiFID II framework (ESMA35-43-2900, 2 February 2022) — Read 13 November 2026: the firm should receive at least the number of clients handled, products distributed and financial figures, and proof the agent disclosed the firm's name (para 29); it deals with complaints about the agent's activities (para 31); it can terminate with immediate effect when in clients' interests (para 32)
- ESMA: ESMA to launch Common Supervisory Action on MiFID II conflicts of interest requirements (2 December 2025) — Read 13 November 2026: a CSA on conflicts of interest in the distribution of financial instruments, covering the possible impact of staff remuneration and inducements on what products are offered; ESMA and the NCAs will carry it out during 2026
- CFTC Release 7582-17: Rosenthal Collins Capital Markets LLC, now DV Trading LLC, ordered to pay a $5 million civil penalty (29 June 2017) — Read 13 November 2026: from early 2013 until July 2015 proprietary traders ran wash trading strategies to generate exchange rebate fees under a CME market maker program; a trader evaded the firm's wash blocking system to trade against himself
- B2BROKER: How to Set Up an Introducing Broker Program — Published 5 February 2024, updated 12 June 2026, read 13 November 2026: IB onboarding should fire the same KYC and AML workflows as client onboarding, with sanctions and PEP screening and the source of commission income recorded; for the US regime, a disclosure document naming the carrying broker and its regulatory status; real-time payout ledgers partners can check; audit trails of every calculation and payout
- Track360: Fraud Landscape in Forex IB Programs (course lesson, undated) — Read 13 November 2026: $7 per standard lot on 10,000 lots a month is $70,000 in monthly rebate costs; 15% artificial volume loses $10,500 a month on a single IB relationship; self-referral, phantom sub-IBs, wash trades, churning and rebate cycling defined
- Track360: Rebate Abuse and Volume Manipulation (course lesson, undated) — Read 13 November 2026: opposing positions in one account or across coordinated accounts; correlated EUR/USD, EUR/GBP, GBP/USD washes; churning involves real market risk; an opposite trade within 10 minutes on under 5% of trades is healthy, above 30% a wash pattern; hold times under 60 seconds; rebate exceeding net trading profit as extraction; positions closed within 60 to 120 seconds earn no commission
- Track360: Multi-Tier IB Payout Cascades (course lesson, undated) — Read 13 November 2026: the broker pays the sum of all tiers on every trade; margin compression is the single largest risk; cap tiers at 3 for lot-based models; limit total payout per lot to 60 to 70% of spread revenue; overrides only on sub-IBs that meet minimum monthly volume
- Track360: Qualification Rules and Hold Periods (course lesson, undated) — Read 13 November 2026: typical hold period 14 to 30 days, commission calculated in real time and voided if the trader fails qualification; example 21-day CPA and 14-day lot holds; CPA clawed back on 100% withdrawal within 30 days; never apply clawback rules retroactively; minimum trade duration 60 to 120 seconds
This guide is engineering and product guidance from EntropyX Labs, a technology provider. It is not legal, regulatory or investment advice.