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What Is a Commodity Contracts Broker?

A commodity is a good that is in demand and is supplied to meet the needs of end users. Commodity prices fluctuate daily based on global supply and demand. In order to trade commodities, a commodity contracts broker is needed.

  1. Definition

    • A commodity contracts broker is either a firm or an individual that executes orders to buy or sell commodity contracts for clients and then charges them a commission for the trade.

    What They Trade

    • Commodity contracts brokers can trade a wide variety of products, such as grains and livestock contracts. They also can trade products known as derivatives on many kinds of items, such as foods, metals, energy, stock indexes, individual stocks and currencies.

    Types

    • Types of commodity brokers include the previously mentioned floor broker/trader, someone who trades contracts for a specific commodity on a commodity exchange, such as the Chicago Mercantile Exchange. A commodity trading adviser (CTA) advises others on the trading of commodity contracts. A CTA is equivalent to a financial adviser or mutual fund manager for commodities takes a profit for advice. Other types of commodity brokers exist as well.

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