Which type of firm introduces customers to a clearing firm?

The type of firm that introduces customers to a clearing firm is known as a fully disclosed firm. This designation means that the brokerage does not handle customer assets directly but instead works with a clearing firm to manage transactions and custody of assets. In this setup, customers are typically aware that their accounts are held with the clearing firm, which handles trade execution, settlement, and record-keeping.

Fully disclosed firms facilitate the trading process without needing to perform the clearing themselves, allowing them to focus on customer service and sales activities. Their relationships with clearing firms are structured in a way that emphasizes transparency about who ultimately holds the customers' accounts.

Self-clearing firms, on the other hand, perform their own clearing and handle all transactions internally, eliminating the need to introduce clients to another firm for these services. Carrying firms also deal with the clearing process but typically do so for other firms rather than introducing customers directly. Investment advisory firms are focused on providing financial advice and may not engage in the clearance or execution of trades on behalf of clients in the same manner as brokerage firms.