There are two ways brokers set IB commission. The first is to look at what three competitors publish and land somewhere in the middle. The second is to work out what a lot of volume is worth to the business and decide how much of that you are willing to give away to get it.
The first method is faster. It is also how brokers end up running partner networks that generate impressive volume reports and almost no profit, because nobody added up what the tree costs once it is three levels deep and half the flow is coming through it.
This article is about the second method. The mechanics of how multi-level tracking works, what the partner portal needs, and how attribution is handled are covered in the IB management systems guide. Here we are only talking about the numbers.
Start with revenue per lot, not with competitor rates
Before any rate discussion, you need one figure: what a standard lot of volume is actually worth to your book, by instrument group and by account type.
That figure depends on how you handle flow. A broker running full A-book earns the markup and nothing else, so the ceiling on partner commission is hard and low. A hybrid book has more room on the internalized portion but the number moves with client behavior. If you have not settled this question, the A-book, B-book and hybrid comparison is the place to start, because your execution model sets the budget for everything below.
Revenue per lot is also not constant across your product range. Major pairs, metals, indices and crypto CFDs carry different markups, and a partner whose clients only trade gold will cost you a different share of revenue than a partner whose clients trade EURUSD. Commission rates that ignore the instrument group will overpay someone.
Once you have the figure, the question becomes simple arithmetic: what share of revenue per lot goes to the partner network, and what share stays with the business to cover acquisition, support, technology and profit. Most brokers land somewhere between a third and two thirds, and where you land depends on how much of your growth you want partners to drive. There is no correct answer, but there is a wrong process, which is deciding partner rates without knowing the number they come out of.
The five payout models and where each one fits
Kenmore’s multi-level IB system supports commission as pips, a percentage of profit, a percentage of spread, a percentage of deposit, or cash per lot. Brokers who only offer one model are turning away partners whose business does not fit it.
Pips. The partner earns a fixed number of pips on every lot their clients trade. Simple for the partner to understand and simple for you to forecast. Works best on instruments with stable spreads, and it is the model most experienced IBs expect by default.
Percentage of spread. The partner earns a share of what you actually charged the client. This tracks your revenue automatically, so your margin is protected when spreads widen or tighten. Partners sometimes resist it because they cannot predict the number as easily, which is why the reporting has to show the calculation.
Percentage of profit. The partner earns a share of what the book made from the client. This aligns the partner with the business more tightly than any other model, and it is the model with the most room for high rates, because you only pay when you earned. It is also the one that requires the most trust, since the partner cannot verify the input.
Percentage of deposit. The partner earns on funds brought in rather than on volume traded. Useful when you are entering a new region and care about funded accounts more than about turnover, and useful for partners whose audience deposits and holds. It is rare among vendors, and it is often the model that wins a partner who has been offered per-lot terms everywhere else.
Cash per lot. A flat amount per lot regardless of instrument or spread. The clearest model to communicate and the easiest to abuse, because a partner whose clients trade only the tightest-spread instrument can cost more than they generate. Cap it by instrument group.
Most mature programs run more than one of these at the same time, applied to different partner types. The educator gets a deposit percentage, the signals channel gets pips, the regional agent gets cash per lot on the instruments their clients actually trade.
Cent accounts change the math
Cent accounts are how partners in emerging markets and educators with beginner audiences bring clients in. If your commission system cannot handle them properly, you lose those partners.
The problem is contract size. A lot on a cent account represents a fraction of the volume of a standard lot, so a flat cash-per-lot rate configured once and applied everywhere will either pay a partner almost nothing for real cent volume or pay far too much relative to the revenue it produced. Percentage-based models scale on their own. Per-lot models do not.
The fix is to configure rates per account type rather than globally, which means the system has to support that separation in the first place. Kenmore’s module runs commission on regular and cent accounts under the same partner structure with independent rate configuration, so an educator bringing fifty cent accounts and an agent bringing five standard accounts can sit in the same tree on terms that make sense for both.
The same logic applies to swap-free accounts and any other account type where your revenue per lot differs from the default. If you offer Islamic accounts, the absence of swap revenue should be reflected in what you pay on them.
How deep should the tree go
Unlimited levels sounds like a feature you would never use. In practice it matters for a specific reason: you cannot predict how deep your best partner’s network will get, and a system with a hard ceiling forces you to renegotiate with the exact partner you least want to upset.
What actually happens as a tree gets deeper is that the money at each level shrinks fast. A workable pattern is a steep taper: level one takes the large majority of the partner allocation, level two takes a meaningful fraction of that, and each level below drops sharply. By level four or five the per-lot amounts are small enough that they function as an incentive to recruit rather than as income.
That is the point. Deep levels are not there to pay level five. They are there so that a partner at level one has a reason to build a network rather than just refer clients, and so that a sub-partner can see a path to building their own. The recruiting argument this gives your partner team is covered in the IB recruitment guide.
Set the taper so that the total cost of a full tree stays inside the budget you set at the start. Then check it against the worked case below.
One lot through a three-level tree
Here is an illustrative structure, using round numbers to show the shape of the arithmetic rather than to recommend rates.
Assume a standard lot of EURUSD where your markup produces 10 USD of revenue. You have decided the partner network can take up to 60 percent of that, leaving 4 USD to the business.
A taper that fits: level one earns 0.4 pips (4 USD), level two earns 0.15 pips (1.50 USD), level three earns 0.05 pips (0.50 USD). Total payout is 6 USD, and 4 USD stays with the business.
Now run the failure case. A partner negotiates level one up to 0.6 pips because a competitor offered it, and nobody adjusts the levels below. Total payout is 8 USD against 10 USD of revenue. The business keeps 2 USD per lot, out of which it still has to pay for support, technology, payment processing and everything else. The program is now generating volume at a loss, and the report showing record partner volume looks like good news.
Two things prevent this. First, negotiate the total allocation, not the level-one rate, so that raising one level visibly costs something elsewhere. Second, model the full tree before approving any rate change, using your actual instrument mix rather than EURUSD alone.
Caps, minimums and clawbacks
A rate table without limits will eventually be exploited, usually not maliciously.
Cap per-lot payouts by instrument group so that a partner concentrating clients on your tightest-spread product cannot cost more than it earns.
Set a minimum payout threshold so that the accounting cost of processing a payment does not exceed the payment. Partners understand this as long as the threshold is visible in the portal and the balance carries forward.
Write down a clawback rule for chargebacks and reversed deposits, and apply it before it is needed rather than after. A partner who is told about a clawback in advance treats it as a policy. A partner who discovers one from their balance treats it as theft.
Tie rate increases to sustained volume over a period rather than to a single strong month, and put the thresholds in writing so the partner can see what they are working toward.
The abuse cases to configure against
Self-referral is the common one: a partner opens client accounts and trades them to collect commission on their own volume, sometimes offsetting positions between two accounts so the trading itself is close to neutral. Matching client details against partner details catches most of it, and volume that appears immediately after signup with no deposit history is the pattern worth alerting on.
Volume manipulation is the other: opening and closing positions with no intent to hold, purely to generate lots. Instrument-level caps and minimum holding rules limit the damage.
Both sit inside a wider problem set covered in fraud prevention for forex brokers, and the IB management systems guide goes into the detection patterns in more detail.
Configuring it without waiting on a developer
Every rate decision above is worthless if changing it takes a support ticket and two weeks. Rate structures need adjusting: when you enter a region, when you launch an instrument group, when a partner grows into a new tier.
The configuration you want is per level, per account type, per instrument group, adjustable by your own team, with the calculation visible to the partner in the same portal where they see their volume. Kenmore’s module handles this inside the CRM with direct MT4 and MT5 integration, so commission calculates against actual trade data rather than against a report someone exported. Pricing for the module and the rest of the platform runs on a flat monthly fee with no revenue share, which keeps the vendor cost out of the per-lot arithmetic above.
Review the rates on a schedule
Commission structures drift. Spreads change, the instrument mix shifts, a partner who negotiated hard two years ago is now on terms that no longer reflect what they bring.
Put a review on the calendar twice a year. Pull revenue per lot by partner, compare it against what that partner costs across all levels of their tree, and sort by margin rather than by volume. The partners at the bottom of that list are the conversation. Some of them will be worth renegotiating. Some of them are bringing volume you are better off without.
Before you change anything, tell the partners first. The KPIs worth tracking alongside this review will tell you whether the network is growing the business or just growing.
Talk to us if you want to model a structure against your own numbers before you publish it.
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