Guidelines On Starting A Commodity Brokerage Business

2007-03-08 10:33:40

( Financial )



Commodity brokerage firms play an important role in commodity trading in exchanges. Commodity brokerage firms ensure that the purchase and sale of commodities are made based on an agreed price and commission. A commodity brokerage firm also provides individuals with advice on certain investments as an added service.

Commodity trading is a rewarding business especially for those individuals who become experts in the field. Some individuals decide to operate an independent commodity brokerage firm after becoming thoroughly knowledgeable in the business. Here are a few guidelines for you to consider if you are thinking of opening a commodity brokerage firm:

Your company must be registered with the local security exchange commission before you start commercial operations.

You should decide on the type of brokerage firm to operate. There are firms that deal with introductory arrangements, and firms that deal with futures commodity trading. Futures commodity brokerage firms normally handle the typical tasks of a brokerage firm as mentioned above. In contrast, commodity brokerage firms that handle introductory arrangements merely refer work to a futures commodity firm.

Commissions that are to be charged to clients must be established prior to the start of business operations. Your commission rate can be determined by comparing the other commission rates that other companies charge.

A commodity trading brokerage normally provides a number of services. The type of services that you plan to offer must be determined at this stage as well. Some examples of services that is typically provided include full service brokerage and discount brokerage. With a full service brokerage, your company will be responsible for market research, selection of commodities for investment and recommending the investment to clients. A discount brokerage service on the other hand, only allows you to obtain the client’s orders for investment and the execution of the trade on the client’s behalf.

Lastly, if you are considering opening a commodity brokerage firm you must ensure that you are aware of the market trends and keep the client informed on these trends.


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