A commodity broker is a firm or individual who executes orders to buy or sell commodity contracts on behalf of clients and charges them a commission. A firm or individual who trades for his own account is called a trader. Commodity contracts include futures, options, and similar financial derivatives. Clients who trade commodity contracts are either hedgers using the derivatives markets to manage risk, or speculators who are willing to assume that risk from hedgers in hopes of a profit.
A COMMISSION AGENT IS ALSO REFERRED TO AS A BROKER.
History.
While historically commodity brokers traded grain and livestock futures contracts, today commodity brokers trade a wide variety of financial derivatives based on not only grain and livestock, but also derivatives based on foods/softs, metals, energy, stock indexes, equities, bonds, currencies, and an ever growing list of other underlying assets. Ever since the 1980s, the majority of commodity contracts traded are financial derivatives with financial underlying assets such as stock indexes and currencies.
Types.
Firms and individuals who are often collectively called commodity brokers include:
Floor Broker/Trader: an individual who trades commodity contracts on the floor of a commodities exchange. When executing trades on behalf of a client in exchange for a commission he is acting in the role of a broker. When trading on behalf of his own account, or for the account of his employer, he is acting in the role of a trader. Floor trading is conducted in the pits of a commodity exchange via open outcry.
Futures Commission Merchant (FCM): a firm or individual that solicits or accepts orders for commodity contracts traded on an exchange and holds client funds to margin, similar to a securities broker-dealer. Most individual traders do not work directly with a FCM, but rather through an IB or CTA.
Introducing Broker (IB); a firm or individual that solicits or accepts orders for commodity contracts traded on an exchange. IBs do not actually hold customer funds to margin. Client funds to margin are held by a FCM associated with the IB.
Commodity Trading Advisor (CTA): a firm or individual that, for compensation or profit, advises others, on the trading of commodity contracts. They advise commodity pools and offer managed futures accounts. Like an IB, a CTA does not hold customer funds to margin; they are held at a FCM. CTAs exercise discretion over their clients' accounts, meaning that they have power of attorney to trade the clients account on his behalf according to the client's trading objectives. A CTA is generally the commodity equivalent to a financial advisor or mutual fund manager.
Commodity Pool Operator (CPO): a firm or individual that operates commodity pools advised by a CTA. A commodity pool is essentially the commodity equivalent to a mutual fund.
Registered Commodity Representative (RCR)/Associated Person (AP): an employee, partner or officer of a FCM, IB, CTA, or CPO, duly registered and licensed to conduct the activities of a FCM, IB, CTA, or CPO. This is the commodity equivalent to a registered representative.
Regulation.
A single firm or individual may be registered and act in more than one capacity.
In the United States, an individual working in any of the above roles must pass the Series 3 National Commodity Futures Examination administered by the Financial Industry Regulatory Authority (FINRA). With few exceptions, most individuals who act as a FCM, IB, CTA, and CPO, as well as their RCR/APs, are required to register with the Commodity Futures Trading Commission (CFTC), and be members of the National Futures Association (NFA). Floor brokers/traders who are members or employees of a commodity exchange generally do not need to be members of the NFA, as they are regulated by the exchange.
Broker
A broker also referred to as 'a commission agent', is an individual person who arranges transactions between a buyer and a seller for a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal. Neither role should be confused with that of an agent—one who acts on behalf of a principal party in a deal.
A broker is an independent party, whose services are used extensively in some industries. A broker's prime responsibility is to bring sellers and buyers together and thus a broker is the third-person facilitator between a buyer and a seller. An example would be a real estate broker who facilitates the sale of a property.[1]
Brokers also can furnish market information regarding prices, products, and market conditions. Brokers may represent either the seller (90% of the time) or the buyer (10%) but not both at the same time. An example would be a stockbroker, who makes the sale or purchase of securities on behalf of his client. Brokers play a huge role in the sale of stocks, bonds, and other financial services.
There are advantages to using a broker. First, they know their market and have already established relations with prospective accounts. Brokers have the tools and resources to reach the largest possible base of buyers. They then screen these potential buyers for revenue that would support the potential acquisition. An individual producer, on the other hand, especially one new in the market, probably will not have the same access to customers as a broker. Another benefit of using a broker is cost—they might be cheaper in smaller markets, with smaller accounts, or with a limited line of products.
Before hiring a broker, it may be considered prudent to research the requirements relating to someone using the title. Some titles, such as real estate brokers, often have strict state requirements for using the term, while others, such as aircraft brokers, typically have no formal licensing or training requirements.
History of broker Early for marketer there where two source available to them to sell their property.
(1) Direct way that is through means of print media, pamphlet, door to door selling as there was not that much growth in digital platforms. At that time radio was also effective and useful tool for marketer.
(2) Indirect way selling by means of channel partner (broker) because early the marketer alone cannot reach to whole target audience instead on behalf of him channel partner use to sale his property. broker was first introduce in the business of real estate after it was bifurcate in other segment.
Etymology.
The word "broker" derives from Old French broceur "small trader", of uncertain origin, but possibly from Old French brocheor meaning "wine retailer", which comes from the verb brochier, or "to broach (a keg)".[2]
Types of brokers
- Broker-dealer
- Brokerage firm
- Business broker
- Cargo broker
- Commodity broker
- Customs broker
- Information broker
- Insurance broker
- Intellectual property broker
- Investment broker
- Joint venture broker
- List broker
- Marriage broker
- Mortgage broker
- Options broker
- Pawnbroker
- Power broker (term)
- Prime broker
- Real estate broker
- Ship broker
- Sponsorship broker
- Stockbroker
- Sharebroker
- Office broker
- Serviced office broker
- Yacht broker
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