SIC 6221 Commodity Contracts Brokers and Dealers

SIC 6221

This industry classification includes establishments primarily engaged in buying and selling commodity contracts (futures) on either a spot or future basis for their own account or for the account of others. These establishments are members, or are associated with members, of recognized commodity exchanges. Establishments primarily engaged in buying and selling commodities are classified in wholesale trade. However, the Chicago Board Trade doesn't trade, it just provides facilities for members to trade future and options contracts.

NAICS CODE(S)

523130

Commodity Contracts Dealings

523140

Commodity Brokerage

According to the U.S. Census Bureau, in 2002, 1,085 establishments operated as commodity dealers and 1,411 as commodity contracts brokerages. The industry employed over 22,000 people and generated $6.79 billion. During January and February, 2005, global futures and options trading volume was 1.41 billion contracts, up 4.7 percent. Futures volumes accounted for most of the gain, with an 11.5 percent volume year-on-year increase, whereas options trading edged up just 0.6 percent. The U.S. markets were particularly active as volume increased to 514.1 million contracts, a growth of 18.9 percent. Domestic futures led the way with 236.2 million contracts, followed by options on equity with 223.7 million contracts, and options on futures with 54.1 million contracts.

In general, brokers are independent traders who bring together buyers and sellers of the same commodity and execute their orders. The broker receives a commission on each of these transactions. These brokers are agents of their clients and are, therefore, subject to the law of agency in their dealings with their clients. In contrast to the broker's role as an agent, a dealer acts as a principal in relations with customers. This is the only difference between commodities brokers and dealers. The number of agents grew significantly during the late 1990s and early 2000s, from just 630 establishments in 1997 to nearly 1,100 in 2002. Brokerage firms, however, remained stable in numbers during the same time period.

Commodities brokers and dealers are engaged in the trade of commodities on either a current, "spot," or a future basis. Commodities are typically agricultural, mineral, or other basic products and financial futures that are traded on a commodity exchange. The products are generally substitutable. This means that the purchaser...