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Parties of a Commodity Exchange & Trading
Let’s learn more about parties of a commodity exchange & trading. A commodities exchange is a legal entity that determines and enforces rules and procedures for trading standardized commodity contracts and related investment products. A commodities exchange also refers to the physical center where trading takes place. The commodities market is massive, trading more than trillions of dollars each day. These different parties are import part of commodity exhcnages. A market cannot function if any of them is not there. There are three different types of players in the commodity markets:
- Commercials: The entities involved in the production, processing or merchandising of a commodity. For example, both the corn farmer and Kellogg’s from the example above are commercials. Commercials account for most of the trading in commodity markets.
- Large Speculators: A group of investors that pool their money together to reduce risk and increase gain. Like mutual funds in the stock market, large speculators have money managers that make investment decisions for the investors as a whole.
- Small Speculators: Individual commodity traders who trade on their own accounts or through a commodity broker. Both small and large speculators are known for their ability to shake up the commodities market.
