Commodity Broker Job Description, Skills, and Salary
Get to know about the duties, responsibilities, qualifications, and skills requirements of a commodity broker. Feel free to use our commodity broker job description template to produce your own. We also provide you with information about the salary you can earn as a commodity broker.
Who is a Commodity Broker?
Typically, commodity brokers act as agents to execute purchases and sales of commodity futures and options. They frequently execute trades for individuals, businesses, and even their accounts. Generally, these brokers work for brokerage firms, on-exchange trading floors, or as independents. Brokers are typically compensated with a fee or commission for acting as a middleman on behalf of others. Brokers are classified into two categories: discount brokers and full-service brokers.
A commodity broker manages a client’s commodity trades. Additionally, the term “commodity broker” can refer to an investment firm that engages in commodity trading. Commodities are tangible goods such as grain, meat, or metal that are traded globally via a variety of investment strategies. Purchasing and selling commodities is an ancient practice that dates back to the time when empires established trading systems to increase their resources and wealth. This goods trade continues today, with investors utilizing modern methods such as commodity brokers.
The primary responsibility of commodity brokers is to fulfill orders based on specific instructions received from their clients. By contrast, full-service brokers may act as commodity trading advisers to their customers in addition to executing trades. Additionally, they may offer a variety of other services, such as market research and trade recommendations. To begin, brokers must be available to accept orders and execute trades. When orders are fulfilled, they must immediately communicate specific information about the completed orders to their clients.
Numerous full-service brokers keep their clients informed of any relevant news that may affect their trading positions. Monitoring and maintaining financial information, such as account balances and other pertinent data, are also tasks that a commodity broker typically performs. A commodity broker must be a member of the exchange to work on the floor of the exchange.
Most brokers work for brokerage firms that are exchange members. They are permitted to trade directly on the exchange’s floor. Typically, each of these brokerage houses has its floor brokers who execute trades on behalf of the company. When company brokers receive orders from the general public, they forward them to the company’s floor brokers who work in the trading pit.
Another type of broker, referred to as an introducing broker, operates its own business. They trade for their accounts and have acquired customers through the solicitation of trading business. Introducers forward their orders to brokerage houses, which execute the trades on their behalf. While introducing brokers are compensated, they do not handle the customers’ funds.
A commodity broker typically holds a bachelor’s degree. Individuals who develop a strong academic foundation in subjects such as economics, finance, and business are well prepared to enter this field. Additionally, sales aptitude, strong research abilities, and exceptional communication skills are required. Futures trading’s intense and fast-paced environment also necessitates the ability to perform under duress.
Brokers must pass the National Commodities Futures Examination to comply with state and federal regulatory requirements in the United States. Additionally, it is referred to as the Series 3 exam. The exam evaluates a commodity broker’s competency and includes questions about the commodities market, trading knowledge, and trading regulations. Additionally, registration with the National Futures Association is required to practice as a commodity broker. Brokers who work on exchange floors are exempt from taking the exam but must complete a rigorous training program.
Commodity trading is frequently impacted by unpredictable market disruptions such as natural disasters, making it more volatile than financial investments such as stocks and bonds. Commodity brokers gain knowledge of market fluctuations and advise clients on how to maximize their return on investment. They invest on behalf of their clients through the use of contracts, exchange-traded funds (ETFs), and options.
By regulating trade on a commodities exchange, a commodity broker facilitates transactions for individuals or businesses. They assist investors in diversifying their portfolios by purchasing and selling physical goods. Commodity brokers acquire investments through futures contracts, which are agreements to sell goods at a specified price on a predetermined future date. Additionally, they sell commodities through options, which allow the buyer to purchase a commodity in a specified amount of time at a price determined by the item’s current value. Additionally, clients can purchase goods directly from brokers through a contract with a broker.
Commodity brokers are critical to the facilitation of trading; whether trades are executed online or over the phone, a commodity broker is critical to the efficient execution of trades. The term “commodity broker” is frequently used to describe someone who executes commodity trades on behalf of their clients. Additionally, it can refer to a brokerage firm that specializes in commodity trading.
Brokerage firms are classified as introducing brokers (IB) or futures commission merchants for registration purposes (FCM). Associating persons are individuals (AP).
Commodity brokers make commodity trading accessible to the average investor. Apart from owning a seat on an exchange and trading in commodity pits, the majority of people must trade via a broker.
Commodity brokers may employ traders on the floor to execute your trades, or they may use an electronic trading platform to place and execute trades. Exchanges rely on brokers to bring them business. They have established their own set of rules that govern how brokers conduct business.
Conducting business with a few dozen brokerage firms is far more convenient than allowing hundreds of thousands of people to trade directly with an exchange.
Commodity Broker Job Description
Below are the commodity broker job description examples you can use to develop your resume or write a commodity broker job description for your employee. Employers can also use it to sieve out job seekers when choosing candidates for interviews.
The duties and responsibilities of a commodity broker include the following:
- Submitting purchase or sale orders on behalf of clients
- Purchasing and selling contracts to earn a commission.
- Keeping an eye on market trends and performance figures.
- Meeting and communicating with clients to gain a better understanding of their investment needs.
- Keeping clients informed of commodity purchases and sales.
- Advising clients on the most effective commodity investment strategies
- Maintaining contact with commodity traders to relay client decisions.
- Maintaining client financial records
- Negotiating the purchase or sale of exchange-traded funds (ETFs) like stock trading.
- Analyzing the international commodities market to identify trends
- Creating reports and forecasts that serve as a guide for investors
- Advising investors on investments and recommending appropriate assets
- Collaborating with industry stakeholders in mining, transportation, shipping, and insurance
- Developing and implementing hedging strategies to assist clients in risk mitigation
- Evaluating potential new business ventures
- Managing client accounts and supervising a team of brokers
- Performing routine maintenance and management of the exchange’s system and static data
- Conducting onboarding and account maintenance functions
- Managing unique projects and streamlining processes
- Conducting research and resolving trade disputes
- Providing superior client support
Qualifications
- Must have a bachelor’s degree in supply chain management, economics, or a related field.
- Prior experience in supply chain or commodity management
- Must possess a thorough understanding of the financial markets that affect commodity prices.
- Working knowledge of commodity trading and risk management software, including iRely and Allegro.
- Ability to negotiate effectively and communicate effectively with vendors and suppliers.
- Superior analytical abilities.
- Strong leadership abilities and the ability to collaborate effectively with subordinates from various departments.
Essential Skills
- Conducting market research
The ability to conduct in-depth market research is critical. This ability enables brokers to identify new investment opportunities and weigh the risks and rewards associated with them. Market research data enables brokers to advise clients on the most profitable trades.
- Risk management
Risk management is another critical skill in this role. Whether your clients are hedgers or speculators, a small calculation error can result in significant losses. Thus, an effective broker frequently understands how to assess the risk associated with a trade or asset class to assist clients in making informed decisions.
- Analytical skills
may employ technical analysis to ascertain market trends and traders’ behavior on exchanges. As a broker, it is critical to be proficient in a variety of technical analysis strategies. Additionally, it is critical to be proficient at utilizing various software and traditional tools to make sound investment recommendations to investors.
- Technological literacy
Nowadays, the majority of trades take place online, via the web- and mobile-based trading platforms. Additionally, large brokerages develop proprietary algorithms and market analysis tools that increase brokers’ confidence and enable them to make better decisions when buying and selling commodities and other derivatives. Additionally, brokers make extensive use of spreadsheet tools for monitoring and analytical purposes. Being proficient in these areas can help you increase your effectiveness and earning potential.
- Communication skills
The position requires strong writing and communication skills, as well as exceptional public speaking abilities. Your job may require you to write reports, collaborate with others, communicate with clients and regulators, and even travel to markets, all of which require superior communication skills.
- Capacity to perform under duress
Commodity trading is a high-stakes, time-sensitive activity. Slight changes in conditions can have a significant impact on commodity prices, and brokers who act quickly can earn enormous profits. Brokers have made several recommendations that have the potential to cost clients billions of dollars in investment. Being able to maintain composure and make sound judgments in such situations is a critical characteristic for brokers.
- Decision-making skills
Successful commodity brokers are adept at making sound judgments that assist clients in mitigating risk or maximizing profits. It is critical to have strong analytical abilities as a broker to make sound decisions. The ability to correctly read the market and anticipate traders’ behavior based on certain prevailing factors can increase the effectiveness of your decisions. If your recommendations assist clients in achieving gains or minimizing losses on trades, the potential for generous commissions increases, potentially boosting your earnings.
How to Become a Commodity Broker
- Earns bachelor’s degree
Whether you’re an independent broker or an employee of a brokerage, you must have a bachelor’s degree. A degree in business, finance, economics, management, or a related field may qualify you for a brokerage industry position. Certain senior positions may require advanced degrees and extensive work or managerial experience in specialized areas of commodity trading.
- Take internships into consideration
Internships during or after your studies are an excellent way to increase your employment prospects. Internships can assist you in determining the area in which you wish to specialize. Commodity brokers, commodity trading advisers, commodity pool operators, and spot commodity pool operators are all available positions in the industry.
Each of these roles requires a unique set of skills and responsibilities that an internship can teach you. Additionally, an internship can help you develop industry contacts, learn about graduate programs, and even land a job if you meet an employer’s requirements.
- Enroll in a graduate program
Numerous brokerage firms recruit new employees through graduate programs. These programs can last between one and two years, depending on the organization. Participants in the graduate program may work alongside a mentor and receive intensive on-the-job training in various aspects of the company’s operations. Apart from teaching participants core trading skills, these programs also provide training in communication, public speaking, time management, and leadership, among other areas, to prepare participants for the responsibilities of their roles.
- Obtain a license
After completing your bachelor’s degree, you can apply for a commodity market license. Two major regulatory bodies regulate commodity brokerage, and both require licenses, except in limited circumstances. Commodity futures are regulated by the Singapore Monetary Authority, while commodity derivatives and spot commodity trading are regulated by International Enterprises, Singapore. If you work with any of these assets, you may also be required to obtain a license from the regulatory body.
- Take into account specialized postgraduate degrees.
Consider pursuing a master’s degree in a specialized area of the commodities investment market to increase your employment prospects and career mobility. If you intend to open your brokerage, courses in marketing, business administration, financial intelligence, and specific areas of the investment industry can help you advance your career. Additionally, these courses can help you improve your ability to deliver results for clients.
Where to Work as a Commodity Broker
Most commodity brokers work for commodity trading firms as well as other trading and marketing industries.
Commodity Broker Salary Scale
In the United States, the national average salary for a Commodities Broker is $55,679 per year.