Commodities Broker - An Insight
The first step towards futures trading holds the key to not only ensure the safety of your money but also to generate profits out of the investment.
This crucial first phase involves choosing a commodity broker to guide and execute your plans.
Let's get an insight into commodity brokerage firms.
A commodity broker is basically an individual or a firm, which executes orders for purchase or sale of commodity contracts, usually on behalf of clients for a commission charge.
Individual hedgers, speculators, institutional investors etc form clients of such firms.
The term 'commodity broker' usually encompasses: • Floor Broker: Individual broker trading commodity contracts like futures, options and other derivative instruments on the floor of a commodity exchange on behalf of clients.
• Introducing Broker (IB): An introducing broker is usually a firm that accepts orders from customers to execute commodity contracts traded on an exchange and does not hold customers' funds to margin.
• Futures Commission Merchant (FCM): Similar to an Introducing broker, FCM also accepts orders to execute commodity contracts traded on an exchange; however, it holds customer funds to margin.
• Commodity Trading Advisor (CTA): Such firms play a key role in not only providing their expert advice to investors on trading in commodities, they also usually hold power of attorney to trade on behalf of their clients.
• Commodity Pool Operator (CPO): Acting as per the instructions of CTA, such firms operate commodity pools, which are similar to a mutual fund.
Services Offered: Services rendered by a commodity broker can be broadly categorized as full service brokerage and discount brokerage.
A full service brokerage firm guides in choosing investments, provides advice on latest investment options, presents you with market data to enable you to analyze better and make appropriate decisions.
Though the brokerage charges are higher, such firms are valuable, if you are new to futures trading and if you wish to deal with several markets.
A Discount broker's role is usually limited to execute your trading orders.
In such cases, the onus of conducting detailed research on market data, investments avenues and all decisions relating to futures trading vests on you.
The brokerage charges are low in line with their limited services and these firms are beneficial if you have certain experience and knowledge in commodities trading.
This crucial first phase involves choosing a commodity broker to guide and execute your plans.
Let's get an insight into commodity brokerage firms.
A commodity broker is basically an individual or a firm, which executes orders for purchase or sale of commodity contracts, usually on behalf of clients for a commission charge.
Individual hedgers, speculators, institutional investors etc form clients of such firms.
The term 'commodity broker' usually encompasses: • Floor Broker: Individual broker trading commodity contracts like futures, options and other derivative instruments on the floor of a commodity exchange on behalf of clients.
• Introducing Broker (IB): An introducing broker is usually a firm that accepts orders from customers to execute commodity contracts traded on an exchange and does not hold customers' funds to margin.
• Futures Commission Merchant (FCM): Similar to an Introducing broker, FCM also accepts orders to execute commodity contracts traded on an exchange; however, it holds customer funds to margin.
• Commodity Trading Advisor (CTA): Such firms play a key role in not only providing their expert advice to investors on trading in commodities, they also usually hold power of attorney to trade on behalf of their clients.
• Commodity Pool Operator (CPO): Acting as per the instructions of CTA, such firms operate commodity pools, which are similar to a mutual fund.
Services Offered: Services rendered by a commodity broker can be broadly categorized as full service brokerage and discount brokerage.
A full service brokerage firm guides in choosing investments, provides advice on latest investment options, presents you with market data to enable you to analyze better and make appropriate decisions.
Though the brokerage charges are higher, such firms are valuable, if you are new to futures trading and if you wish to deal with several markets.
A Discount broker's role is usually limited to execute your trading orders.
In such cases, the onus of conducting detailed research on market data, investments avenues and all decisions relating to futures trading vests on you.
The brokerage charges are low in line with their limited services and these firms are beneficial if you have certain experience and knowledge in commodities trading.
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