Commodity brokers are companies or individuals that execute orders to buy or sell commodity contracts on behalf of clients and charge commissions to them. Companies or individuals who trade for their own account are referred to as merchants. Commodity contracts include similar futures, options, and financial derivatives. Clients that trade in commodity contracts are hedgers who use derivatives markets to manage risks, or speculators who are willing to assume the risk of a hedger in the hope of profit.
Video Commodity broker
History
Although historically commodity brokers trade in wheat and cattle futures contracts, currently commodity brokers trade a wide range of financial derivatives based not only on grain and livestock, but also by food/soft, metal, energy, stock index, equity, bonds , currency, and a growing list of other basic assets. Since the 1980s, most commodity contracts traded were financial derivatives with underlying financial assets such as stock and currency indices.
Maps Commodity broker
Type
Companies and individuals who are often collectively referred to as commodity brokers include:
Floor Broker/Trader: an individual who trades commodity contracts on the commodity exchange floor. When executing a trade on behalf of a client in exchange for a commission he acts in the role of a broker. When trading on behalf of his own account, or for his supervisor's account, he acts as a merchant. Trade flooring is done in commodity exchange pits through open protests. A floor broker is different from a "floor merchant" who also works on the stock floor, making trades a staple for his own account.
Futures Trading Traders (FCM): companies or individuals requesting or receiving orders for exchange-traded commodity contracts and depositing client funds for margin, similar to securities brokers. Most individual traders do not work directly with FCM, but through IB or CTA.
Introducing Broker (IB): the company or individual that requests or receives orders for commodity contracts traded on the exchange. The IB does not actually save the customer's funds to the margin. Client's funds to the margin are held by IB related FCM.
Commodity Trade Advisors (CTA): companies or individuals who, for compensation or profits, advise others, on commodity contract trading. They suggest a commodity pool and offer a managed futures account. Like IB, CTA does not store customer funds for margin; they were detained in FCM. CTA implements discretion over their client accounts, meaning that they have the power to trade client accounts on their behalf in accordance with the client's trading objectives. CTA is generally a commodity equivalent to a financial advisor or a mutual fund manager.
Commodity Swimming Operator (CPO): the company or individual operating the commodity pool suggested by the CTA. A commodity group is essentially a commodity equivalent to a mutual fund.
Registered Commodity Representative (RCR)/Associated Person (AP): employees, partners or officers of FCM, IB, CTA, or CPO, registered and licensed to engage in FCM, IB, CTA, or CPO activities. This is a commodity equivalent to a registered representative.
Rule
One company or individual can be registered and acted in more than one capacity.
In the United States, a person working in one of the above roles must pass the 3 Series National Commodity Examination Test set by the Financial Industry Regulatory Authority (FINRA). With few exceptions, most individuals acting as FCM, IB, CTA, and CPO, as well as their RCR/AP, are required to register with the Commodity Futures Trading Commission (CFTC), and become members of the National Futures Association (NFA ). Floor brokers/merchants who are members or employees of a commodity exchanges generally do not need to be members of the NFA, as they are governed by the exchange.
See also
- Broker
- Commodity exchange
- Commodities
- Derivatives (financial)
- Futures contract
- Hedge (finance)
- Hedge funds
- Options (finance)
- Speculation
Regulators in the United States
- Commodity Futures Trading Commission
- National Futures Association
Commodities Broker (USA)
- Alternate Icons
Commodity Brokers in India
- Sushil Finance
- Zerodha
- Tradeplus
Commodity exchange
- CME Group
- Kansas City Trade Council
- London International Financial Futures and Options Exchange
- The New York Trade Council
References
Source of the article : Wikipedia
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