In the world of trading, commodity brokers number less than 10 percent of other registered securities representatives. The stocks and trade industry is available to many online, but trading commodities is still a specialized industry and requires specialized individuals to navigate the field. The About.com article outlines how you can become a commodity broker.
For those who become proficient at trading commodities, being a commodity broker can provide a lucrative career. The salary of a commodity broker is dependent on sales skills and ability to open accounts and build a clientele. A commission earning profession, the thrill of the trade and the prospect of earning a lot of money can make the profession enjoyable.
A commodity broker is required to be registered and licensed with the National Futures Association (NFA), as outlined by the commodity profession. A two-part exam, called the Series 3 is required of all seeking to become the Associated Person designation in the commodities field. The first section includes question on all things trading including; futures market, futures contracts, hedging, options and orders. Part 2 of the exam will test you on rules and regulations, focusing specifically on “treating the customer properly”. Ask your brokerage firm for study manuals. Also research online courses that will help you prepare. The NFA online also provides an outline of the test on their website.
Once you have taken and passed the test to become a commodity broker, the NFA requires you to complete an 8-R form, which is a history of your life. You will need to provide your 10 year work history, 5 year residential history, criminal history, and disciplinary actions if you hold any other financial license. This detailed profile is a precursor to the FBI background check you will undergo prior to receiving your temporary license. The packet you will send to the NFA will include the 8-R form and a card from your local police office with your fingerprints on it.
Firms that specialize in commodity trading are called Introducing Brokers (IBs), which is where you will work as a commodity broker. You can also work directly for a Futures Commission Merchant (FCM), but the majority of FCMs are located in New York and Chicago. There are approximately 150 FCMs and 1,500 IBs.
Your role as a commodity broker will not only require you to be a superstar salesperson, but you will need to be a first-class analyst, able to perform in-depth research on commodity markets and trade commodities. If you are lucky, your firm may have a separate department that will do some of the research and analysis for their commodity brokers.
Chicago is an ideal city to make a living as a commodity broker. The Chicago Board of Trade (CBOT) and Chicago Mercantile Exchange merged to form the CME group an ideal place to begin your career as a commodity broker. Other cities are limited in their number of commodity brokerage firms. If you can handle the pressure and develop a strong clientele, being a commodity broker can be a fruitful career.
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