What Is a Brokered CD?
A brokered CD is a certificate of deposit issued by a brokerage firm rather than a bank or credit union. Like traditional CDs, brokered CDs pay interest over a fixed period and return your principal at maturity. The main difference between the two is that brokered CDs are bought and sold in a securities market. This allows investors to access a broader range of rates and terms than may be available at a local bank or credit union.
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Brokered CDs are issued by banks but distributed to clients by brokerage firms. Investors can purchase them in online brokerage accounts alongside stocks, bonds, and mutual funds. Brokered CDs increased in popularity in 2022 and gained steam, reaching roughly a year-end market of $822 billion by the end of 2024.[1]
Takeaways
- Brokered CDs are CDs that pay interest at regularly scheduled intervals.
- You can purchase a brokered-CD through your online trading platform.
- Brokered CDs are issued by banks and more liquid than traditional CDs.
- Brokered CDs can be bought as newly issued CDs or in the secondary market.
- Bump-up CDs are federally insured by the FDIC for up to $250,000 per depositor per institution.
How a Brokered CD Works
When you buy a brokered CD, you are purchasing it through a brokerage platform, not directly from a bank. The bank still holds your funds and issues the CD, but the brokerage acts as a middleman.
Here is how it works:
- A bank issues a CD with a specific term and interest rate.
- A brokerage firm buys these CDs in bulk (called bulk purchasing) and offers them to its clients.
- You choose a CD based on term length, interest rate, and issuing bank.
- Interest may be paid monthly, quarterly, or semiannually.
- At maturity, the issuing bank returns your principal.
One of the great attributes of brokered CDs is that you can sell your CD before it matures through the brokerage's secondary market. However, the price you receive may be more or less than what you originally paid, depending on interest rate changes and market demand.
Read More: What Is a CD Ladder?
Smart Tip:
Before buying a CD, make sure to check the:
- Interest payment frequency
- Whether interest payments are automatically reinvested
- Annual Percentage Rate (APY)
- Callability of the CD
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Example of a Brokered CD
Let’s say you have done your homework and want to purchase a brokered CD. You log in to you online brokerage platform, like an E*TRADE or Empower. Then, you navigate to a 2-year brokered CD offered by a bank that pays an APY of 5.00%.
You decide to purchase $10,000 worth of a CD through your brokerage. Once you own the CD, interest is paid to your brokerage account quarterly, and at the end of the 2-year term, you receive your initial $10,000 back.
If interest rates drop in the meantime, you could sell your CD on the secondary market for more than you paid. If rates rise, selling early could result in a loss.
Pros of Brokered CDs
- Wide Selection – Since the sourcing of CDs is done by your brokerage, you get access to the best CDs from multiple banks without having to open bank accounts at each bank.
- Higher Rates – Brokered CDs may offer better rates than traditional CDs because these brokerages are trying to get the best products available for their clients.
- Liquidity – One of the downsides of owning CDs is that there might be an early withdrawal penalty. But with brokered CDs, you have a liquidity premium because you can sell your CD on the secondary market, without penalties.
- Convenience – Managing all your investments in one brokerage account makes your investing life streamlined. (Read more about Automating Your Finances).
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Cons of Brokered CDs
- Market Risk If Sold Early – Selling before maturity may result in a loss if rates have risen, especially if interest rates have risen since your purchase. If that is the case, then the market value of your CD may be lower.
- Complexity – Pricing and different features, like payment schedules, call options, and interest rate movements, can be more complex to understand than those of traditional CDs.
- Callable Risk – Some brokered CDs can be “called” by the bank before maturity, which means your investment ends early. When this happens, the bank that issues your CDs sees that interest rates are falling and redeems your CD before its maturity date. Redeeming your CD early effectively allows the bank to refinance its CDs at a lower rate.
- No Bank Relationship – When you purchase a Brokered-CD, you work through your online brokerage, not directly with the issuing bank. Because of this, you can’t really negotiate terms, maturity dates, or fees. Instead, you trust that the brokerage has sourced the best CDs available and pick the best option for you.
Are Brokered CDs FDIC Insured?
For any investment, you want to understand how your money is protected. Brokered CDs are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per bank, including principal and interest. For a CD, FDIC insurance covers both the deposited amount and accrued interest. FDIC insurance applies per account type and per issuing bank.[2]
If you want to invest in multiple CDs but are concerned about reaching FDIC limits, brokered CDs might be your solution. By holding multiple CDs issued by different banks through a single brokerage, you can expand your FDIC coverage, getting the best of both worlds: access to the best CDs and extra insurance coverage.
Brokered CD vs. Yankee CD
A Yankee CD is a type of CD issued by a foreign bank operating in the United States and denominated in U.S. dollars. It is typically offered to institutional investors and is less common for everyday investors.
The key differences:
- Brokered CD - Offered by U.S. banks through U.S. brokerage firms.
- Yankee CD - Offered by foreign banks in U.S. markets, often with higher minimums and greater risk.
For most individual and retail investors, brokered CDs offer lower risk and easier accessibility. Read more about the 7 Types of Certificates of Deposits.
Brokered CD vs. Yankee CD
Brokered CDs offer flexibility, variety, and competitive rates for investors with online brokerage accounts. They work similarly to traditional CDs, but you can trade them in the secondary market, which offers extra liquidity to your investment portfolio. We think Brokered CDs are a great investment for new investors due to their FDIC limits, flexibility, and ability to generate passive income. Like the idea of investing in CDs? Check out our recommendations for the Best Certificates of Deposits.
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(1) IDC Financial Publishing, Inc. Brokered CDs Reaching Modest New Highs in 2024 and 2025. Last Accessed February 1, 2026.
(2) FDIC. Deposit Insurance FAQs. Last Accessed February 1, 2026.
