Brokered CD
A Brokered CD is a Certificate of Deposit issued by a bank but sold through a brokerage firm or investment platform rather than directly to depositors, allowing investors to access CDs from multiple institutions in one account while retaining FDIC insurance coverage on qualifying balances.
Brokered CDs differ from bank-direct CDs primarily in their distribution channel and secondary market characteristics. When a bank needs to raise deposits quickly or at scale, it may issue large blocks of CDs through broker-dealer networks — including major wirehouses, discount brokerages, and online investment platforms — rather than marketing individual retail CDs through its own branch or website. These block CDs are then broken into smaller denominations and offered to brokerage customers.
A key practical advantage of brokered CDs is consolidated account management. An investor at a single brokerage can purchase CDs from dozens of different FDIC-member banks, each covered up to $250,000 per bank per ownership category, potentially achieving far greater total FDIC coverage than would be possible at any single institution. This makes brokered CDs particularly attractive for high-net-worth depositors, treasurers, and institutions managing large cash positions.
Another distinguishing feature is secondary market tradability. Unlike direct bank CDs, brokered CDs can often be sold through the brokerage before maturity on a secondary market, providing an exit route that standard CDs do not offer without incurring early withdrawal penalties. However, secondary market liquidity for brokered CDs is not guaranteed, and selling before maturity may result in receiving less than par value if prevailing interest rates have risen since issuance — a market risk that direct CDs with fixed early withdrawal penalties do not carry in the same way.
Brokered CDs can be structured as fixed-rate, step-rate, or variable-rate instruments depending on issuing bank preferences. Step-rate CDs increase their coupon at predetermined intervals over the term. Variable-rate brokered CDs may tie their coupon to an index such as the Secured Overnight Financing Rate (SOFR).
A critical distinction for FDIC coverage purposes: brokered CDs are held in the name of the brokerage firm for the benefit of the customer (street name registration). The FDIC still extends coverage to the beneficial owner, but customers must verify that the issuing bank is an FDIC member and that aggregate deposits at that bank — including brokered and direct CDs — do not exceed coverage limits.
Brokered CDs are frequently found on the new-issue market offerings of major brokerages during periods of elevated interest rates, when banks compete aggressively for deposits and investors actively seek short-duration fixed income alternatives with government-backed safety.