Commodity broker

The commodity broker is essentially a person or firm that liaisons between individual traders and the commodity exchange. In other words the commodity broker is a member of the commodity exchange, having direct connection with the exchange to carry out all trades legally. He is also known as the authorized dealer.

To become a commodity trader one needs to complete certain legal and binding obligations. There is a routine process followed, which is slated by a unit of the Government that lays downs laws and acts with regards to commodity trading. A broker of commodities is also required to meet certain criteria to gain such membership in the exchange.

To become a member of the commodity exchange the broker or brokerage firm should have a net worth amounting to Rs. 50 Lakh.

This sum has been determined by the Multi Commodity Exchange. They are stringent went it comes to enrolling members, as there are some fraudulent, so-called commodity brokers who trade on commodities and then do not pay up their dues to the exchange. They just shut shop overnight and get away with all the money.

When investors are required to select a commodity broker they should ideally keep certain aspects in mind to ensure that they are not being misled in any which way. These factors include:
-The net worth of the broker of brokerage firm
-The clientele
-The number of franchises/branches
-The market credibility
-The references
-The kind of services provided – back office functioning being most important
-Credit facility
-The research team
These are amongst the most important factors to calculate the credibility of the commodity broker.