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.
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.
