I'll confess, I have spent much of my life not knowing what a commodity broker is, or what one does. Common sense means that I can have a good guess. They buy and sell sugar, coffee and gas. But there must be more to it than that, surely?
Brokers buy and sell these raw materials on behalf of product producers and buyers. They can also deal in futures and options, based on physical commodities. Commodity brokers provide services within commodity broking companies, investment banks and exchanges/clearing houses such as the London International Financial Futures and Options Exchange (LIFFE) and the International Petroleum Exchange of London (IPE).
A broker liaises between clients and the market. The broker will keep clients updated on news that's moving the markets they focus on, provide technical analysis, execute orders that clients place, and manage their accounts. Commodity brokers effectively act as their customers' eyes and ears on the market.
They brief customers on market conditions and price trends, monitor their customers' positions and suggest strategies to help them to manage risk and to trade profitably. Brokers need to track the events that drive prices in commodity markets and be able to respond to changing conditions.
So if you're wanting to enter the trade, is it advisable to study economics or maths, then?
Not so, says 26-year-old Joanna James, who lives in London and works for Sucden (UK), one of the UK's leading commodities, financial futures and options brokers. James did a degree in Chinese studies at Cambridge and wanted to work in London but using her linguistic skills.
Sucden was recruiting graduate trainees and looking for someone to work with its Chinese clients.
"Finding my way into the brokerage sector was more by luck than judgement, as it's an area I knew very little about at the time of my application," she says. "Commodity brokerages traditionally haven't participated in the graduate 'milk round', so there wasn't much information available from the university's careers service."
A normal workday for James starts at around 7.30am when she comes into the office to check prices from the overnight trading session: "I call our Asian clients to see what they're interested in for the day ahead. Then I check trades from the previous day and sort out any problems as they arise, which involves working with our back and middle offices."
She'll then watch prices, read market reports and news and pass on the relevant information to clients and prospective clients as well as taking calls and placing orders.
In the afternoon, the London Metal Exchange (LME) floor opens,followed by the exchange floors in New York and Chicago, so the afternoons are normally busier and more focused on trading. The LME closes at 5pm, after which James will check trades with the floor traders and our clients, finish off e-mails and make a few final calls. It's not a job for a part-timer; James usually leaves the office between 5:30pm and 6pm.
James doesn't believe you need to be a particular personality type to be a good broker but, she says, "it definitely helps if you have an eye for detail, a sense of humour and are able to work well under pressure. Good interpersonal skills are also useful for developing a rapport with clients and with the team."
Martyn Drage, who is career development manager at Reading University's ICMA (International Capital Market Association) Centre, says, "It seems to me as though the qualities you need to have in the brokerage game are flair and entrepreneurial spirit. Some employers accept applications from very well-qualified graduates but they are also looking for that elusive X factor."
Drage believes that the old-boys' network isn't nearly as strong as it used to be and that these days the City operates on a much more obviously meritocratic basis. But he warns, "As in many other walks of life, it does pay to build a network of acquaintances."
Working as a commodity broker can involve a high-pressure environment and long hours but, says an evidently fulfilled James, "When the markets are busy, as they have been for most of this year, this is a great job to do - very exciting and varied - and there are plenty of opportunities for travel."
The Financial Services Authority, www.fsa.gov.uk
The International Petroleum Exchange of London, www.theipe.com
The London Metal Exchange www.lme.co.ukReuse content