What is a Commodity Broker? Definition

A commodity broker is a company or individual that receives and executes orders to buy or sell commodity contracts on behalf of clients, and then charges a fee or commission for their services.  

The term “commodity broker” is an umbrella term that encompasses many varieties of firms and individuals; some examples of which are Introducing Brokers (IB), Futures Commission Merchants (FCM), and Commodity Trading Advisors (CTA). 

A Commodity Broker looking at his trading monitors

Image Source: BigStock

Brief Overview of Commodity Brokers

A Commodity Trading Advisor advises others regarding the trading of commodity contracts, and then charges a fee or commission for services rendered. 

An Introducing Broker solicits or accepts orders for commodity contracts and then trades them by way of an exchange. 

Similarly, a Futures Commission Merchant also solicits and accepts commodity contract orders. However it holds client funds and allows client to trade on margin. 

Registered Commodity Representatives (RCR), who are trained and licensed to handle commodity contract transactions, conduct all trades.

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