Commodity broker

Commodity brokers buy and sell contracts for commodities on behalf of their clients. They try to negotiate a transaction that will give their client the most favourable terms available.

Work activities

The term commodities is used to describe things like metals, petroleum and financial products. Some examples of these are:

Precious metals – gold, silver and platinum.
Base metals – copper, zinc, tin and lead.
Energy – crude oil and natural gas.
Financial products – gilts, bonds and interest rate contracts.
Foods – cocoa, coffee, sugar and wheat.
Plastic products.

Commodity brokers buy and sell contracts for these products on behalf of their clients. Their objective is to negotiate a successful transaction for their clients on the best commercial terms available and at the best time possible. Certain types of higher-risk contracts can also be referred to as derivatives. Desk-based commodity brokers act as a direct link throughout the trading day between a buyer or seller of a commodity and the exchange on which that commodity is traded. Using telephone and computer links, the producer, broker and consumer agree a price. Very often, the buyer and the seller are in different parts of the world and the commodity under discussion is not bound for the UK, even though the transaction is handled by a London-based broker.

Commodity brokers tend to specialise in one or two commodities. They must be well informed about the commodity in which they deal. This involves reading the financial and trade press and keeping up to date with information provided by in-house and external research teams. In the past, there have been two types of commodity broker – desk-based and floor-based. Almost all exchanges have moved from floor-based to electronic trading (screen-based) and telephone systems. Where the practice still exists, floor brokers conduct transactions on the floor of some markets at certain times of the day; this is sometimes known as “open outcry”, for example, “ring” trading at the London Metal Exchange. This usually involves shouting out the details of the proposed deal on the floor until a buyer or seller is found. Floor brokers act on the instructions passed to them by desk brokers. In some cases (but very infrequently), commodity brokers might visit the country from which their commodity originates in order to carry out quality checks, although this is usually the job of a commodity analyst.

Personal qualities and skills

As a commodity broker, you’ll need to be:

Able to cope with pressure, long hours and a hectic working environment.
Confident, decisive and energetic.
Able to retain the confidence of your clients.
Intuitive, quick-witted and alert.

You should have:

Excellent communication skills.
A high standard of numeracy and the ability to do rapid calculations.
IT skills.

Languages can be an advantage – communicating with clients in their own language can be a significant advantage in gaining new business.

Pay and opportunities

According to the UK Tax Calculators website, commodity traders can expect to earn between £29,000 and £143,000 per year. Salaries are generally increased by performance-related pay and bonuses.

Typically, a commodity broker’s working day is long, with early starts and sometimes late finishes. You may work evenings and weekends.

The work of commodity brokers is centred on the international exchanges in the City of London, which act as marketplaces for worldwide commodity dealings. Banks or securities houses also employ brokers. Other employers are large manufacturers with their own broking departments. Opportunities for commodity brokers occur with employers located in London, as the major financial centre of the UK.

Where are vacancies advertised?

Vacancies are advertised in national newspapers, on financial job boards and on employers’ websites. Applicants can also write speculatively to broking firms.

Entry routes and training

To become a commodity broker, you will usually need to have a degree (many employers ask for at least a 2:1). A degree in economics or a related subject, and/ or foreign languages, could be useful for this career. Other relevant subjects you could consider include science, engineering or agriculture. Some entrants might have a postgraduate qualification. You must also have good IT skills.

Training is traditionally carried out on-the-job. New recruits sometimes begin work in a support role. They usually spend time moving around various departments. Trainee desk brokers then move on to a particular commodity desk. Some of the larger firms offer structured training programmes for graduate trainees, or summer placements (internships) for students. New entrants must pass an exam that is recognised by the Financial Conduct Authority, to become a registered broker.

Commodity brokers can progress by handling larger accounts and by moving to larger organisations. Promotion to senior, manager and director posts is possible.

Rehabilitation of Offenders Act: Working as a broker is an exception to the Rehabilitation of Offenders Act 1974. This means that you must supply information to an employer about any spent or unspent convictions, cautions, reprimands or warnings, if they ask you to. This is different from other careers, where you only have to reveal information on unspent convictions if you are asked to.

Qualifications

For entry to a degree course, the usual requirement is:

Two to three A-levels.
GCSEs at grades 9-4 in two to three other subjects.
You are likely to need English and maths at GCSE at grades 9-4.

Alternatives to A levels include: Edexcel (BTEC) level 3 National qualifications the International Baccalaureate (IB) diploma. However, course requirements vary, so check prospectuses carefully.

Adult opportunities

Age limits: It is illegal for any organisation to set age limits for entry to employment, education or training, unless they can show there is a real need to have these limits.

Some entrants have a professional background in financial work.

If you don’t have the qualifications needed to enter your chosen degree or HND course, a college or university Access course (for example, Access to Business) could be the way in. No qualifications are usually needed, but you should check this with individual colleges.

Relevant professional qualifications are available by distance learning from the Chartered Institute for Securities & Investment (CISI) and the CFA Society of the UK.

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