What is a Forex Rebate?
Forex brokerages profit through the Spread and/or Commission charged to a trader. Spreads and Commissions ultimately eat into a traders profits or increase a losing trader’s losses. Forex rebates see traders receive a portion of these costs back from their brokerage either directly into their trading accounts or via a third party. Forex rebates programs have become increasingly popular over the last few years, as they allow a trader to reduce the costs of trading.
How Do Forex Rebates Work?
Many Forex brokerages, enter into agreements with Introducing Brokers. It is the job of an Introducing Broker to bring business to a Forex brokerage with these introducer’s marketing brokerages through a number of different avenues. Introducing Brokers receive commission for the trader’s they bring to a brokerage, with greater trading volume equalling increased commissions for these Introducing Brokers. These commissions are normally equal to a fixed share of the spread or commission.
A number of Introducing Brokers released one way to incentive trader’s to sign up with the brokerages they were promoting was to share a percentage of their commission with trader’s. This has led to their being a significant number of Introducing Brokers offering rebates to clients they introduced to their supported brokerages. This has led to fierce competition regarding the kind of deals that clients can get from Introducing Brokers and has led to significantly decreased for traders who wish to deal with certain brokerages.
Typically, rebates are paid by Introducing Brokers via PayPal or some other electronic payment system. Traders typically receive rebates from their Introducing Brokers once a month, but a number of brokerages allow Introducing Brokerages to pay rebates directly into a traders trading accounts and such a system tends to make it easier for traders to receive rebates with out any hassle on their behalf.
It should be noted that their have been a number of cases where Introducing Brokers have reneged on their commitment to give their referred clients rebates. This means that many traders prefer to opt for established and well known Forex rebate programs which have a history of reliably paying rebates to traders.
Spread Reductions are something which has been increasingly offered by Introducing Brokers, and see traders receiving a reduced spread when signing up with particular IB’s. As STP brokerages typically add a fixed mark-up onto the spreads they receive from their liquidity providers, which they then share with Introducing Brokers. In this case the Introducing Broker simply forfeits a certain amount of his share of the spread mark-up, which means the trader receives better trading conditions. Despite, the ease of this approach to rebates very few brokerages and Introducing Brokers offer their clients the chance to take advantage Spread reductions.
Where Can I Get Forex Rebates
There literally hundreds of different Introducing Brokers offering a variety of different rebates, and which Introducing Broker you will end going with will depend on the kind of rebate and the particular brokerage you are interested in using. Many traders end up going with larger rebate programs such as the one offered by CashBackForex, where they can choose from a range of different brokerages and opt for the rebate that suits them best.