Commodity Trading Houses

Abstract This chapter discusses commodity trading houses, which refer to companies that buy and sell physical commodities and commodity derivatives for their own account and/ or on behalf of their customers. Commodity trading houses may be very specialist and deal in a few commodities only or they may have a wide-ranging business covering many different types of commodity. Moreover, commodity trading houses may form part of a wider group, where other parts of the group are in the business of producing commodities, whether that is by extracting them from the ground as a natural resource or manufacturing a usable product from one or more such resources. The commodity trading house may effectively be the marketing entity within the group. Sometimes that marketing entity will also enter into derivatives. The chapter then considers the reasons why commodity trading houses might trade commodity derivatives and the different ways in which such trading can be undertaken. It also studies the regulatory regime applicable to commodity trading houses and the reasons why such companies may fall within the scope of financial services regulation in some countries.