Clearing Firms Frequently Asked Questions (FAQ)


1. What is the distinction between an introducing firm and a clearing or carrying firm?
When you open an account with a brokerage firm that is a clearing or "carrying" firm, the firm not only handles your orders to buy and sell securities, but it also maintains custody of your securities and other assets (like any cash in your account). With an introducing firm, the brokerage firm accepts your orders—but it will have an arrangement with a carrying firm to maintain custody of your securities account. Because they have custody of customer assets, carrying firms must maintain higher levels of net capital than introducing firms—and they are responsible for segregating the customer funds and securities in their custody.