Client Rebate

A client rebate is a mechanism where a portion of the trading cost -- either from the spread markup or the per-trade commission -- is returned to the trader as cashback. The rebate can be funded by the broker directly as a promotional tool, or by the introducing broker who shares part of their own commission with the referred trader. The purpose is to reduce the trader's effective cost of trading and create a tangible incentive to open and maintain an account through a specific IB or partner link.

The mechanics work as follows: if a broker charges a 1.5-pip spread on EUR/USD and the IB earns a 0.5-pip IB rebate, the IB might pass 0.2 pips back to the trader as a client rebate, keeping 0.3 pips as their own commission. The trader sees the full 1.5-pip spread on their platform but receives a periodic cashback payment -- typically calculated per lot traded and paid daily, weekly, or monthly. This differs from simply offering a tighter spread because the rebate is paid after execution.

Client rebates create a three-way economic relationship between broker, IB, and trader. For the IB, offering client rebates reduces per-trade margin but can significantly increase trader retention and trading volume, resulting in higher total earnings. For the broker, client rebates through IBs reduce the need for direct promotional spending while maintaining competitive pricing. The operational complexity lies in calculating rebates accurately across different instruments, lot sizes, and rebate tiers -- especially when the IB offers different rebate levels to different traders.