Commodity brokers are typically agents in charge of executing commodity futures and options purchases and sales. They make trades for individuals, businesses, and even their own accounts on a regular basis. These brokers are typically employed brokerage firms, work on exchange trading floors, or work as independents. Brokers are typically paid a fee or commission for acting as a middleman on behalf of others. Brokers are divided into two categories: discount brokers and full service brokers.
The primary responsibility of discount brokers is to fill orders based on specific instructions received from their clients. Full service brokers, on the other hand, may provide commodity trading advice to their customers in addition to executing trades. They may also offer a variety of additional services, such as market research and trade recommendations. Brokers must first and foremost be available to accept orders and execute trades. They must immediately communicate specific information about completed orders to their clients once orders are filled.
Many full-service brokers keep their customers up to date on any relevant news that may have an impact on their trade positions. Tasks typically performed a commodity broker include monitoring and maintaining financial information such as account balances and other pertinent data. A commodity broker must be a member of the exchange in order to work on the floor of the exchange.
The majority of brokers work for brokerage firms that are members of the exchange. They are allowed to trade on the exchange’s floor directly. Many of these brokerage firms employ their own floor brokers to execute trades on their behalf. When company brokers receive orders from the general public, they are forwarded to the company’s floor brokers in the trading pit.
Another type of broker, known as introducing brokers, owns and operates their own business. They trade for their own accounts and have customers they’ve approached for trading. Introducing brokers forward their orders to brokerage firms, which execute the trades on their behalf. Introducing brokers are compensated, but they do not handle the funds of their clients.
A commodity broker typically holds a bachelor’s degree. People who have a strong academic background in subjects such as economics, finance, and business will have a head start in this field. It’s also necessary to have a sales aptitude, strong research abilities, and excellent communication skills. Futures trading requires the ability to perform under pressure due to the intense and fast-paced environment.
Brokers must pass the National Commodities Futures Examination to meet the regulatory requirements of state and federal agencies in the United States. The Series 3 exam is another name for it. The exam assesses a commodity broker’s competency asking questions about the commodities market, trading knowledge, and trading regulations. Practicing as a commodity broker also requires registration with the National Futures Association. On the exchange floors, brokers are not required to take the exam, but they must complete a rigorous training program.