In simple terms, a broker is a person who buys and sells things on behalf of others. A broker, in financial terms is technically defined as a regulated professional who buys and sells financial instruments on behalf of a client and charges a fee for doing so. The financial instruments that are bought or sold can come in many forms including shares, derivatives, bonds, stocks and so on. Also their clients can be individuals or companies.
Brokers exist not only in financial markets, but also real estate, commodities and even the arts and antique markets. Since inception of the Ghana Commodity Exchange, there have been lots of questions on the opportunities that are available for an individual who is not a farmer or an end user of the various commodities traded on the Exchange. It is with this in mind I would want to introduce you to becoming a commodity broker on the Ghana Commodity Exchange.
A commodity broker is an individual who trades commodity contracts on the floor of a commodities exchange. This trade can be conducted on behalf of a client or for one-self. When executing trades on behalf of a client in exchange for a commission, he is acting in the role of a broker. When trading on his own account, he is acting in the role of a trader. As agents of their clients, brokers have an obligation to get the best possible prices for the tradeed commodities (whether buying or selling).
The responsibilities of a broker can be summarized to be creating a technical base to make transactions on the Exchange with the main function being to execute trades on the financial markets for the customer and on his own behalf. Focusing on the Ghana Commodity Exchange, outlined below are some obligations of a broker;
- Broker must aggregate commodities, deposit and trade through the exchange.
- Broker must support client(s) in aggregating and depositing of commodities in the GCX warehouse(s) and trade on their behalf.
- Broker must guide client(s) in pricing their commodities using the Daily Reference Prices and last traded prices as a benchmark.
- Broker must contact client and agree on the preferred price for his/her commodities, input the agreed price and review where necessary.
- Broker must ensure client is informed about all GCX operations and give client(s) all latest relevant information from the exchange.
- Broker must communicate regularly with the client(s) to review prices based on current market information, among others.
Just as with any other line of duty, interest is of importance. One will enjoy working as a commodity broker if he or she has a strong interest in trading commodities and in addition have sales skills which can be learnt and improved overtime. Sales are an important consideration as you will have to open accounts and build a book of business.
The good news with becoming a broker on the Ghana Commodity Exchange is that it provides registered brokers with a client base of producers, processors and consumers whom they can represent as brokers. Brokers are also helped by the mitigation of risk offered by the exchange since it enables them to trade in commodities on the exchange with assurance of prompt payment and/or delivery. Further, the enforcement of rules with regards to transacting across the exchange, including monitoring schedule, helps to ensure that the integrity of member companies, including brokerage firms is upheld, thus making the exchange a transparent and competitive environment for brokers to trade successfully. In addition, brokers benefit through the price discovery available when trading with the exchange since it allows them to set competitive rates for their services in line with the current prices on the market. Moreover, the Exchange serves as a conduit between brokers and producers, making it easier for brokers to locate those producers who are unwilling or unable to trade on the Exchange themselves directly and offer their services to them.
One will therefore ask, who qualifies to be a GCX broker?
– Any individual who can aggregate commodities traded on the exchange and who agrees to work per the GCX rules
– A brokerage firm registered with the GSIA
– A registered company, firm, enterprise, or group who intends to trade in the listed commodities on the exchange under GCX membership rules.
It is worth noting that the commodities market is a highly cyclical business. That is, prices and therefore interest varies based on the market conditions at every point in time. However, because the Ghana Commodity Exchange is a repository for data, informed decisions can be made throughout the year when working with the exchange. Interested in becoming a commodity broker, kindly contact the Ghana Commodity Exchange by calling 0302690670/ 0302690674/ 0302690675.
The writer works with Ghana Commodity Exchange.