Sub-IB commissions are calculated according to the applicable agreement and Schedule A. Depending on the agreed commission structure, they may be calculated as a percentage override, a fixed rebate per lot, or a points-based amount based on the trading volume generated by clients referred by the Sub-IB.
For example, if a Tier 1 MIB receives $12 per lot and a Tier 2 SIB receives $10 per lot, the commission is distributed based on the difference between the two tiers.
If a direct client of the Tier 2 SIB trades 1 lot:
Tier 2 SIB receives: $10
Tier 1 MIB receives: $2 override (the $12 Tier 1 rate minus the $10 Tier 2 rate)
Total commission: $12
This structure allows the difference between the commission rates of each tier to be paid as an override to the higher-level IB.