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 futuresoptionsand similar financial derivatives.

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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. Ever since the s, the majority of commodity contracts traded are financial derivatives with financial underlying assets such as stock indexes and currencies.

When executing trades on behalf of a client in exchange for a commission he is acting in the role of a broker. When trading on behalf of his own account, or for the account of his employer, he is acting in the role of a trader.

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Floor trading is conducted in the pits of a commodity exchange via open outcry. Futures Commission Merchant FCM: Most individual traders do not work directly with a FCM, but rather through an IB or CTA. IBs do not actually hold customer funds to margin. Client funds to margin are held by a FCM associated with the IB.

Commodity Trading Advisor CTA: They advise commodity pools and offer managed futures accounts. Like an IB, a CTA does not hold customer funds to margin; they are held at a FCM. CTAs exercise discretion over their clients' accounts, meaning that they have power about a illegal stock brokerage attorney to trade the clients account on his behalf according to the client's trading objectives.

A CTA is generally the commodity equivalent to a financial advisor or mutual fund broker commodity firms futures trading. Commodity Pool Operator CPO: A commodity pool is essentially the commodity equivalent to a mutual fund.

This is the commodity equivalent to a registered representative. In the United States, an individual working in any of the above roles must pass the Series 3 National Commodity Futures Examination administered by the Financial Industry Regulatory Authority FINRA.

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