The commodities broker is a person who buys and sells commodities such as wheat, coffee, sugar, oil and metals on behalf of producers of goods and buyers. He also trades in derivatives (futures and options) ensuing from physical goods.
The commodities broker is paid a fee or commission for drawing up contracts and effecting sales. The rate of commission is usually fixed by the Government or the regulatory board that manages the exchanges.
The commodities broker gets his commission regardless of whether the client gains or looses. He pays an agreed-upon margin sum to the exchange board.
Many commodities brokers operate their own brokerage firms. Therefore, they not only act as mediators between clients and exchanges, but also manage their own speculation activities.
commodities brokers may be attached to commodity broking companies, investment banks and exchanges or clearing houses.
Since a commodity broker must be conversant with the prevailing economic scenario and trends, a good college education is a must, particularly in big securities and investment firms.
Actually, the majority of people taking up this profession are in fact college graduates. While no specific academic grounding is required, programs in economics and finance are beneficial. People with sales experience have an edge over others.
Commodity brokers must have excellent interpersonal and communication skills so as to bond with clients as well as to build a network of contacts. They should also possess good logical and analytical abilities, keen observation, and confidence to handle negative responses.
They must be capable of operating in highly strenuous and fast-paced surroundings. They need to put in long hours, work under pressure, function independently, and be capable of making clear-cut decisions.
Commodities brokers must fulfill State licensing requirements, which generally consist of clearing a test, and if required, giving a personal bond. Many employers give on-the-job training to enable commodities brokers meet the registration criteria for certification.
When hiring a commodities broker, his credentials need to be verified first, then all terms, conditions clearly stated, and the contract duly signed.
A commodity broker acts as a liaison between the clients and the commodity exchange. He buys and sells stocks, bonds, commodity futures and other securities on behalf of clients. He spells out commodity trading terms and practices, provides financial guidance in buying specific commodities, and helps build a client’s financial portfolio by providing vital data.
The broker scans market reports and news and forwards the relevant information to the clients. He takes calls and carries out orders placed by the clients. He handles clients’ accounts and constantly checks their position.
The commodity broker ensures that all contract related paperwork is updated, appropriate signatures affixed and deliveries made accordingly.
Backed by his professional experience, he helps ascertain the price of specific commodities. By conveying this valuable information to clients, he helps them determine the best way to augment their profits.
Commodities brokers engage in speculative dealing on commodity exchanges namely:
Forward deals where a person buys at the existing price with the intention of selling at a future increased price or vice-versa.
Option deals where the right to trade in a specific commodity within a definite time and at a pre-determined price is bought from a dealer.
A commodities broker advises clients on how best to utilize their retirement funds so as to guarantee a financially secure future.
Based on clients’ investment objectives, which may be short-term or long-term, a commodity broker provides data on the pros and cons of such an investment. The commodity broker makes intelligent investments with the client’s money. He also makes available the most recent price quotes on various securities as well as detailed reports on the companies dealing in such securities.
In a highly volatile market subject to price fluctuations, the commodity broker tracks price trends and keenly watches global markets.
Commodities brokers also offer technical assessment, research and consultancy services.
Commodities brokers are much sought out by clients for their expertise in insurance, tax planning, estate planning, and other financial matters.
Endowed with the entrepreneurial spirit, they hunt for and chase new business opportunities.
They meet up with both national and international clients and suppliers.
Commodities brokers look into quality, delivery schedules and standards.
They stay in contact with shipping and transportation companies.
Thus, a commodities broker helps clients figure out the very exciting and complex world of commodities trading.