Lot-Based and Spread-Based Commission Structures
Forex IB commissions are fundamentally different from iGaming affiliate commissions. Instead of paying per player or per revenue share, you pay based on the trading activity of referred clients. The two primary models are lot-based commissions and spread-based commissions.
Lot-Based Commissions
In a lot-based model, the IB earns a fixed dollar amount for every standard lot traded by their referred clients. This is the most common IB commission structure globally.
For example, if the commission is $5 per lot and a referred client trades 20 lots in a month, the IB earns $100 from that client for that month. The commission applies to every trade, regardless of whether the trader makes a profit or loss.
| Commission Per Lot | Monthly Volume (lots) | Monthly IB Earning |
|---|---|---|
| $3 | 50 | $150 |
| $5 | 50 | $250 |
| $7 | 50 | $350 |
| $10 | 50 | $500 |
Lot-based commissions can vary by instrument. Majors (EUR/USD, GBP/USD) might pay $5/lot while exotics (USD/TRY, USD/ZAR) might pay $8-12/lot due to wider spreads and higher revenue per trade for the brokerage.
Spread-Based Commissions
In a spread-based model, the IB earns a percentage of the spread (or commission) charged to the trader on each trade. If your brokerage charges a 1.5 pip spread on EUR/USD and the IB receives 0.5 pips, the IB effectively earns a portion of every trade's transaction cost.
Spread-based models align IB earnings directly with brokerage revenue. The more the brokerage earns from a trade, the more the IB earns. This reduces the risk of paying out more in IB commissions than you earn in revenue.
Choosing Between Models
| Factor | Lot-Based | Spread-Based |
|---|---|---|
| Simplicity | High - fixed amount | Medium - varies by instrument |
| IB appeal | High - predictable | Medium - depends on spread |
| Margin safety | Moderate - fixed cost | High - tied to revenue |
| Symbol variation | Manual per-symbol rates | Automatic via percentage |
| Transparency | Very clear | Requires spread visibility |
Setting Rates That Work
Your IB commission must be lower than the revenue you generate per lot from the trader. If your average revenue per lot (from spreads and commissions) on EUR/USD is $8, paying $5 per lot to the IB leaves you $3 in margin. This needs to cover your operational costs, platform fees, and profit.
Calculate your break-even point for each major instrument pair. Set IB rates that leave adequate margin while remaining competitive with other brokerages in your target markets. Regional expectations matter: IBs in Southeast Asia may accept lower rates than IBs in Europe or the Middle East.
Avoid the race to the top on IB commissions. A brokerage paying $15/lot but offering a poor trading platform will attract IBs who care only about commissions, not client retention. Focus on the total value proposition: competitive rates plus a platform that keeps traders active.
Key Takeaways
- Lot-based commissions pay a fixed amount per standard lot traded. Simple and popular.
- Spread-based commissions pay a percentage of the spread, tying IB earnings to brokerage revenue.
- Set rates below your revenue per lot with margin for costs and profit.
- Rates can vary by instrument. Exotics typically pay more than majors.
Explore Further
Key terms and tools related to this lesson. Deepen your understanding and see how Track360 supports these concepts.
Spread
The spread is the difference between the bid (sell) and ask (buy) price of a financial instrument, serving as a primary revenue source for Forex brokers and a basis for spread-based affiliate commissions.
Spread-Based Commission
A commission model in Forex IB programs where the introducing broker earns a portion of the spread (the difference between bid and ask price) on every trade their referred clients execute.
Introducing Broker (IB)
An Introducing Broker is a partner who refers new traders to a Forex or CFD brokerage in exchange for ongoing commissions, typically calculated on the trading volume or revenue generated by those referred clients.
Affiliate Manager
An affiliate manager is the operator-side role responsible for recruiting, onboarding, managing, and optimizing affiliate partnerships within a partner program.