Understanding The Work of a Commodity Broker

A commodity broker is one who places commodity trades for their clients. They facilitate trading in the commodity markets for the average investor. Commodity brokers manage a group of traders on the floor who will execute your trades. When trading on the commodity market, they may also use a trading platform that places and executes trades electronically at the exchanges. It is the brokers that bring business to the exchanges.

Commodity brokers also provide trading advice and recommendations to individuals. They make it easy for beginners to begin trading commodities. At first, it can be hard to understand commodity markets but they would probably never trade without the help of a broker. There are different kinds of commodity brokers in the market.

Full-Service Brokers

A full service broker places orders over the phone. The broker takes the order and time stamps it. They would then call the FCM in-charge of their order. Robert Janitzek reveals that the order would then be relayed to a trader on the floor for execution or by hand signal. Once the order is filled by the floor broker, they would then give a ticket to the runner or signal back to the clerk. The clerk would then call the broker back confirming the trade. The broker will then inform their client with the fill price upon confirmation.

Online Commodity Broker

In online trading, a client will log into a trading platform furnished by the broker. He will then select a market where he wants to trade together with the type of order, price, and quantity. Robert Peter Janitzek says that when the order looks good, the trader will then hit “Buy” or “Sell” to place the order. The order is routed instantly to the exchange’s trading platform and matched with other similar orders. A market order is typically filled instantly and the trader receives a confirmation on his computer within a second or two.

Compared to a full service broker, online trading is much quicker, efficient, and cheaper. However, they can still use a full service broker if they choose. This lets them discuss trading opportunities and explore their options. Many brokers offer a mix between the two—a trader can talk with a broker then place his own trades online.

The Role of the Commodity Broker

In reality, a commodity broker acts as a go-between for individual traders and the exchanges. He makes the process of commodity trading more orderly through technology, experience, and monitoring regulations. Commodity brokers also help bring in customers. Without them, there would be substantially less business in the commodity markets and people would be much less educated on them.

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