Becoming a commodities broker

Updated February 21, 2017

Commodity brokers are professionals who buy and sell commodities (or futures) on behalf of clients and charge a commission for the service. The job is similar to that of stock brokers but instead of trading stocks, commodities are traded. Commodities are products that come from the earth or are grown such as gold, wheat, lumber, cattle, cotton, orange juice, oil and pork bellies. Commodities brokers must be licensed and registered to work in the industry. To become a commodities broker, a person must pass an exam and a background check.

The Series 3 Examination

Commodities brokers are licensed and registered by the National Futures Association or NFA. The NFA is the governing body for the futures industry. The first step to getting a license is passing the Series 3 examination. The exam tests a person's knowledge of the futures and commodities markets, the exchanges, margin and settlement requirements, regulations and rules, hedging, contracts, options and placing orders. In the article "Series 3 Exam" by Nick Hunter, he writes: "There are no license prerequisites before registering for this exam. Prior financial knowledge and experience is not required for you to pass the exam." There are several ways to study for the exam. Books, online courses and classroom workshops are all available. A person can use all or just one method to learn the information covered in the Series 3 exam. According to Hunter, preparation usually takes 6 to 8 weeks of 1 to 2 hours' home study a day. When the person is ready to take the test, he registers at a testing centre found in most major cities. One national testing centre is Prometric/Pearson. The test is given on a computer, so the score is available immediately. The Series 3 exam is in two parts, has 120 multiple-choice questions and has a 2 1/2-hour time limit. The passing score is 70 per cent. If you fail the test, you can retake it in 30 days.

The Background Check

Before you can become a licensed commodities broker, you must pass a background check. The first step is to fill out the 8-R form with the National Futures Association. The form details your work history for the last 10 years and your places of residence for the last 5 years. The 8-R also deals with any criminal history you may have. You also have to be fingerprinted. This can be done at a police station. Copies of the 8-R and the fingerprints are sent to the NFA. The FBI then does a thorough background check. If you pass the background check and the Series 3 exam, you are issued a temporary license.

Getting Work as a Commodities Broker

Once you have a temporary license, you're able to apply for jobs as a commodities broker. There are several options available. You can work for a futures commission merchant (FCM), which is a large brokerage firm that holds the money of customers. Introducing brokers (IBs) can solicit new customers and place orders like an FCM, but they don't generally hold clients' money. This is usually done by an FCM that works with the IB. Another job option is to be a floor broker. Floor brokers work on the floors of various futures and commodities exchanges. The NFA website lists FCMs and IBs that you can contact. Getting a job as a commodities broker is like getting any job. You must have a detailed resume that illustrates the relevant background and do well in the interview.

bibliography-icon icon for annotation tool Cite this Article

About the Author