Commodity brokers are an elite group of traders relative to stock brokers. Almost all economies have started trading in commodity marketing and this has given way to the development of jobs in commodity broking. Read further to know more.
We all know that traders or brokers are people who are interlocutors between the buyers and sellers of various types of financial instruments. Commodities are articles of commerce like agricultural products, gold, silver, energy and food that are traded on the commodity markets by certified and licensed professionals known as commodity brokers. Traders working in the traditional market exchanges like the Chicago Mercantile Exchange, for instance, are the commodity brokers. With the growth of the Internet, commodity broking has gone digital and it has changed the trends of this industry. Trading through a broker is more expensive than online commodity trading, however, when it comes to real broker trading, the experience of the broker plays a vital role. Online commodity broking is for those who are experienced in understanding the nuisances of the market.
Becoming a Commodity Broker
Being a commodity broker is a difficult profession as survival in this industry is tough. Here are some of the fundamental steps you can take to be a commodity broker.
To become a commodity broker, you need to take the Series 3 examination. To do so you have to work in a firm registered under the Financial Industry Regulatory Authority (FINRA), as the Series 3 exam is to be sponsored by the registered firm you’re working with.
Pass the Series 3 Examination
Series 3 exams or National Commodity Futures Examination is administered by FINRA and it is essential to crack this exam so that you can register in the organization, National Futures Association that regulates the future markets industry. The series 3 exam is a 2 hours 30 minutes, 120 multiple choice questions exam. It is generally necessary to obtain 70% marks or higher. It consist of two parts, viz:
- In part 1, you’ll have to study all the basics of futures market. This may include but is not limited to study in hedging & type of speculations, order types, future & options, technical analysis and spread trading.
- In part 2, major focus is on the detailed study of market regulations and how customers must be handled. Your brokerage firm will provide you with manuals or study related to this paper.
To give series 3 exam, you need to contact the human resource department of your employer. To know about other details of the exam, you can visit the website of the National Future Association (NFA). There are several online tutor courses available for the commodity broker profession.
Complete Other Formalities
You have to fill the form 8-R on the website of National Futures Association (NFA). Similarly, form U10 available from FINRA can also be filled. In these forms, you’re expected to fill all details of your past 10 years employment and residential history. These forms help in employee background check. Any cases of criminal history of any sort, if they exist must be mentioned in the forms. You will also be expected to get fingerprinted, usually at your local office or through the help of a public notary. The information collected is sent to the FBI that conducts the background check on you. The form U10 or form 8-R along with the details, fingerprints is sent to FINRA or NFA respectively.
After following these steps, you are expected to wait for few days or weeks before your results are declared. You can contact the National Futures Association for getting information on your test results. Experience in the field of commodity broking is the best way to learn the intricacies of this profession. Commodity brokers can earn anywhere between US$50,000 to US$60,000 in the starting years. Those who’re still working for obtaining licenses will earn lesser.