Commodity Houses

Commodity houses are financial players that provide liquidity for commodity trading.

The commodity trading business allow producers and consumers of commodity products (such as sugar, cocoa, corn) to trade these products in an organized market.

Commodity trading allows the players in these specific markets to hedge against variations in price, which may be caused by natural phenomena such as excessive rain, draughs, or hurricanes.

The commodity market, being extremelly sensitive to natural disasters, is a difficult market to predict. That is why it is important for the several parties, such as farmers, consumers of raw materials, and others, to stay hedged in case some disaster occurs.

The commodity trading market also has third parties that enter the trading with the objective of profiting from these variations. The high volatility of the commodity market attracts traders that want to make large amounts of money through these sudden changes.

The commodity houses need not to be registed by the Security Exchanges Commission (SEC). Instead, commodity houses have their own regulatory body, the Commodity Futures Trading Commision (CFTC). The CFTC was created to regulate specifically the commodity market.

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