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Can I engage in Commodity Trading?

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Yes, but not directly. The Commodity Futures Trading Commission regulates commodity trading, and individuals are required to go through either an Introducing Broker or a registered Futures Commission Merchant in order to trade commodities. Introducing brokers aren’t allowed to accept funds directly from you, but they will monitor your investment and facilitate communication with the merchant. You have two investment options:


  • Individual Account: You begin by making your initial margin payment to the merchant in order to open your account. Your broker will then monitor the value of the futures in your account and notify you if the value of your contracts drops to 75% of the value initially required for investment. Known as a margin call, this notification requires the investment of additional money in order to return your account to the original margin level. If you fail to meet the margin call your broker will close out your account in order to avoid greater losses. There are two types of individual accounts: Non-discretionary—Your broker isn’t allowed to make decisions without your approval. Discretionary—You grant permission to your broker, or to some other party, to make decisions on your behalf.
  • Commodity Pool: Rather than opening an individual account, you purchase a share in a pool of various commodities. It then becomes the responsibility of the pool to meet margin calls, and your profits and losses are determined by your share ownership. Although it’s not always the case, the losses of pool participants are usually limited to their investment total.



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