What is a Commodity Broker?
A commodity broker is someone who helps clients buy, sell and trade commodities in the commodity market.
They make their income by charging a percentage, or commission, on top of each order that they place for their customers.
Like most investment products, the average person isn't able to buy or sell commodities on the open market. For this reason, they need to funnel their investments through a commodity broker.
The reason for this is that the commodity exchanges would have a difficult time processing and matching bid/ask orders if everyone is allowed to buy and sell commodities on an open exchange.
By moving all trades through commodity brokers, the volume becomes manageable.
Additional Overview and Definition of Commodity Brokers
Discount brokerages used by many individual investors also act as commodity brokers. Instead of having to deal with a person or company that provides this service, you can just look for an online broker that includes commodity trading as part of their services.
The most common commodity product is the futures contracts. This contract is essentially the right to purchase commodities at a certain price point by a certain deadline.