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What is a brokered CD?

Key takeaways

  • Brokered CDs are issued by a bank, just like traditional bank CDs, but purchased through a broker.
  • Because brokered CDs are obligations of the issuing bank, FDIC insurance applies.
  • One key advantage of brokered CDs is that they can allow investors to buy CDs from multiple banks in one place—letting investors expand their FDIC coverage.

Many people are familiar with buying CDs directly from a bank, but may be less familiar with brokered CDs.

Brokered CDs are still issued by banks, but they’re purchased through a broker. While that might sound like a small difference, it can actually bring some surprisingly big potential benefits—like simplifying how you shop around for the best rates and manage your CD holdings.

Read on for more about how brokered CDs work, and pros and cons to consider.

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What is a brokered CD?

Just like traditional bank CDs, a brokered CD is issued by a bank, comes with a set interest rate, and is FDIC-insured, up to certain limits. (Learn more about CDs.)

The key difference is in how you buy them and where you hold them.

Banks issue brokered CDs for the customers of brokerage firms. Banks usually issue brokered CDs in large amounts and the brokerage firm divides them into smaller amounts for resale to its customers. Because the deposits are obligations of the issuing bank, and not the brokerage firm, FDIC insurance applies.

How do brokered CDs work?

A brokered CD works just like a traditional bank CD, except you buy it through a brokerage firm, hold it with the brokerage firm, and receive both interest payments and the repayment of principal when the CD matures, in your account with the brokerage firm.

For example, suppose you are a customer of Fidelity looking to buy a 12-month CD in your brokerage account. You visit the CDs & Ladders research page, and find a 12-month CD with an attractive interest rate issued by (hypothetically) ABC Bank. You decide to deposit $5,000 in the CD.

Your brokerage account will then show the CD from ABC Bank in your portfolio. You’ll earn interest in your brokerage account, according to the CD’s terms, and at maturity you’ll get the principal back in your brokerage account. In the unlikely event that ABC Bank were to fail during your CD’s term, your CD would be protected by FDIC insurance—just as it would if you’d bought it directly with ABC Bank.

What are brokered CD rates and how do they work?

Brokered CD rates work just like rates on traditional bank CDs. Each CD has a set coupon rate, which determines how much interest it pays. (Learn more about how CDs work.) Depending on the terms of the CD, it may pay all of its interest at maturity, or it might make periodic payments, like monthly or twice a year.

That said, with brokered CDs, it’s important to understand the difference between new issue CDs and secondary CDs.

A new issue CD is one that a bank is offering for the first time. When you buy a new issue CD, you’re in the first group of buyers. If you invest $1,000, you receive $1,000 of principal value and you receive interest on that $1,000 principal. If you hold to maturity, you get that $1,000 principal back.

A secondary CD is one that you’re buying from another investor (such as someone who bought a new issue CD, but then needed their money back before the maturity date). Secondary CDs may be priced at, above, or below par value (i.e., you may need to pay more or less than $1,000 in order to buy $1,000 of principal value). Because of this, your overall return may be higher or lower than the stated interest rate of the CD.

That’s why for secondary CDs, it’s particularly important to compare yields, in addition to comparing the coupon rate of each CD. Yield, and the related measures of yield to maturity and yield to worst, can help give a more complete picture of what the total return might be on a secondary CD. (Learn more about how CD prices, rates, and yields work.)

Also consider transaction costs when buying or selling CDs in the secondary market.

Brokered CDs vs. bank CDs

While brokered CDs are similar to bank CDs in many ways, there are a few key distinctions:

Ability to sell before maturity

If you need your money back before maturity, you may be able to sell your brokered CD to another investor. (This is called the “secondary market” for CDs.) That said, there can be drawbacks to selling a CD in the secondary market—scroll down to the “Disadvantages of brokered CDs” section for more. With a bank CD, if you need your money back early, you must generally pay an early withdrawal penalty.


A brokered CD can be transferred from one brokerage firm to another, allowing the owner to consolidate assets at one firm. This is not possible with bank CDs (an investor would need to withdraw from the CD in order to move their money to a different institution).

Ability to expand FDIC coverage

While banks themselves do not have the ability to exceed FDIC insurance limits, a broker such as Fidelity may offer many brokered CDs from hundreds of different banks, each of which provides for FDIC protection up to current FDIC limits. By combining a number of CDs issued by different banks in an account with a brokerage firm, an investor may be able to expand their coverage beyond the current FDIC limits.

Are brokered CDs FDIC-insured?

Brokered CDs offered by Fidelity are FDIC-insured up to $250,000 per account owner, per account type, per institution.

As long as a brokered CD is issued by an FDIC-insured bank, it will be insured up to those limits. As mentioned above, by combining a number of CDs issued by different banks in an account with a brokerage firm, you may be able to expand your FDIC coverage beyond the typical $250,000 per account owner.

Table illustrates how brokered CDs can help FDIC protection go further, by letting investors hold CDs from multiple FDIC-insured banks all in one account.
Figures are hypothetical and for illustrative purposes only.

Advantages of brokered CDs

The potential advantages of brokered CDs can include:

Expanded FDIC coverage

As mentioned above, combining CDs from different FDIC-insured banks may allow investors to expand their FDIC protection—all in one account.

Simplified rate shopping

Shopping for brokered CDs may let you research CDs from multiple banks at once, making it easier to compare rates. Fidelity investors typically will see around 100 new issue offerings and as many as 2,000 secondary offerings at any point in time.


Purchasing brokered CDs requires none of the paperwork that is required when purchasing a bank CD. By consolidating a number of brokered CDs in a single brokerage account at a single financial institution, you can reduce paperwork, streamline the purchase process, and make it easier to track and manage your CD holdings in one place.


As mentioned above, if needed you may be able to sell a brokered CD prior to maturity in the secondary market—potentially making it easier to liquidate a position if you need to.


Brokered CDs come in a wide range of maturities—from as little as 1 month to as long as 20 years. They can also come with various coupon-payment frequencies, and a variety of other specific features such as call protection or a step-up coupon schedule. This can allow investors to tailor their brokered CD holdings to their particular needs and preferences.

Disadvantages of brokered CDs

The disadvantages of brokered CDs can include:

Risks if selling before maturity

The secondary market may be limited, resulting in a low bid for the brokered CD you are selling. The market value of a brokered CD in the secondary market may be influenced by a number of factors including interest rates, provisions such as call or step features, and the credit rating of the issuer. Brokered CDs sold with Fidelity prior to maturity are subject to a trading fee known as a "mark-down."

Requires 2 layers of research

When you buy a CD directly from a bank, you may want to verify that the bank is FDIC-insured and look into its reputation. When you buy a brokered CD, you should still look into the underlying bank—but also verify that the broker you’re purchasing it from is a legitimate financial institution that’s appropriately licensed and regulated.1

Same risks and tradeoffs as bank CDs

Brokered CDs also come with many of the same risks as traditional CDs, including lower yields compared with higher-risk investments, the risk of changing interest rates impacting the market value of a CD, the risk that an issuer may call its CD before maturity, and more.

Read more about the potential advantages and risks of brokered CDs.

How to buy a brokered CD

To buy a brokered CD, you need to have an account with a brokerage firm that offers them. (Learn more about the types of accounts Fidelity offers.) Then, you can search for new issue CDs and/or secondary CDs that meet your criteria. Some factors to consider as you search may be how much you want to invest, how long of a term you want, the CD’s coupon rate and yield, and whether it has call protection.

Fidelity investors can review available new issue CDs and secondary CDs, and easily compare features of the available brokered CDs.

Should you buy brokered CDs?

Brokered CDs might be appropriate if you want to invest in CDs but don’t want to open and manage accounts with the underlying issuing banks.

They can be useful in simplifying comparison shopping, since brokered CDs allow investors to compare rates from multiple banks in one place. They can also be particularly helpful for those who want to invest more than $250,000 in CDs, but who want the simplicity and convenience of managing their CD holdings with just one institution.

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1. "Brokered CDs: Investor Bulletin," US Securities and Exchange Commission, Nov. 23, 2023,

Investing involves risk, including risk of loss.

Past performance is no guarantee of future results.

Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Your ability to sell a CD on the secondary market is subject to market conditions. If your CD has a step rate, the interest rate may be higher or lower than prevailing market rates. The initial rate on a step-rate CD is not the yield to maturity. If your CD has a call provision, which many step-rate CDs do, the decision to call the CD is at the issuer's sole discretion. Also, if the issuer calls the CD, you may obtain a less favorable interest rate upon reinvestment of your funds. Fidelity makes no judgment as to the creditworthiness of the issuing institution.

Lower yields - Because of the inherent safety and short-term nature of a CD investment, yields on CDs tend to be lower than other higher risk investments.
Interest rate fluctuation - Like all fixed income securities, CD valuations and secondary market prices are susceptible to fluctuations in interest rates. If interest rates rise, the market price of outstanding CDs will generally decline, creating a potential loss should you decide to sell them in the secondary market. Since changes in interest rates will have the most impact on CDs with longer maturities, shorter-term CDs are generally less impacted by interest rate movements.
Credit risk - Since CDs are debt instruments, there is credit risk associated with their purchase, although the insurance offered by the FDIC may help mitigate this risk. Customers are responsible for evaluating both the CDs and the creditworthiness of the underlying issuing institution.
Insolvency of the issuer- In the event the Issuer approaches insolvency or becomes insolvent, it may be placed in regulatory conservatorship, with the FDIC typically appointed as the conservator. As with any deposits of a depository institution placed in conservatorship, the CDs of the issuer for which a conservator has been appointed may be paid off prior to maturity or transferred to another depository institution. If the CDs are transferred to another institution, the new institution may offer you a choice of retaining the CD at a lower interest rate or receiving payment.
Selling before maturity - CDs sold prior to maturity are subject to a mark-down and may be subject to a substantial gain or loss due to interest rate changes and other factors. In addition, the market value of a CD in the secondary market may be influenced by a number of factors including, but not necessarily limited to, interest rates, provisions such as call or step features, and the credit rating of the Issuer. The secondary market for CDs may be limited. Fidelity currently makes a market in the CDs we make available, but may not do so in the future.
Coverage limits- FDIC insurance only covers the principal amount of the CD and any accrued interest. In some cases, CDs may be purchased on the secondary market at a price that reflects a premium to their principal value. This premium is ineligible for FDIC insurance. More generally, FDIC insurance limits apply to aggregate amounts on deposit, per account, at each covered institution. Investors should consider the extent to which other accounts, deposits or accrued interest may exceed applicable FDIC limits. For more information on the FDIC and its insurance coverage visit

For the purposes of FDIC insurance coverage limits, all depository assets of the account holder at the institution issuing the CD will generally be counted toward the aggregate limit (usually $250,000) for each applicable category of account. FDIC insurance does not cover market losses. All the new-issue brokered CDs Fidelity offers are FDIC insured. In some cases, CDs may be purchased on the secondary market at a price that reflects a premium to their principal value. This premium is ineligible for FDIC insurance. For details on FDIC insurance limits, visit

Fidelity makes new-issue CDs available without a separate transaction fee. Fidelity Brokerage Services LLC and National Financial Services LLC receive compensation for participating in the offering as a selling group member or underwriter.

If you want to buy or sell a CD on the secondary market, Fidelity Brokerage Services LLC ("FBS") will charge you a markup or markdown. This markup/markdown will be applied to your order, and you will be provided the opportunity to review it prior to submission for execution. CDs are made available through our affiliate National Financial Services LLC ("NFS") and from various third-party providers, including participants on the Tradeweb Markets, TMC Bonds, and Knight Capital Group platforms, with FBS normally acting as riskless principal or agent. These offering brokers, including NFS, may separately mark up or mark down the price of the security and may realize a trading profit or loss on the transaction.

Fidelity does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Fidelity cannot guarantee that the information herein is accurate, complete, or timely. Fidelity makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.

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