How do I Become a Derivatives Broker?

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  • Written By: Ron Davis
  • Edited By: Allegra J. Lingo
  • Last Modified Date: 21 November 2017
  • Copyright Protected:
    2003-2017
    Conjecture Corporation
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To become a derivatives broker, one needs to have the relevant knowledge base, the appropriate licenses, and an employer. In order to remain employed, one must develop a book of business by doing a lot of sales work. Much of the traditional order taking work of a derivatives broker is now done by computers online, but the Internet has also increased awareness of managed futures accounts, thereby creating new opportunities.

Derivatives are divided into commodities, exotics, and stocks. A derivatives broker most commonly handles both commodities futures and options on futures in a wide array of products, including grains, crude oil, and stock and bond markets. Exotic derivatives are specialty products often created by Wall Street banks or by other large financial firms which are not brokered. Stock options are handled by stock brokers and require a separate license. Brokers of all financial products must be licensed, and each country has its own licensing standards.

European education and background standards to become a derivatives broker greatly resemble those for employment at a Wall Street bank. One needs a degree from a good university, preferably in physics, math, or economics and an MBA is definitely an advantage and a PhD is valued even higher. The prospective employee should have a good general knowledge base about derivatives and about financial markets as a whole. An employing firm will have their own training program which will further educate and season the broker, and the firm may also help the trainee to pass the relevant licensing tests.

American full service commodity brokers are more sales oriented. If one wants to become a derivatives broker with a US firm, a good first step is to pass the Series 3 National Commodity Futures exam. This exam covers general knowledge about commodities and futures, legal matters, and ethical behavior towards customers. A brokerage firm will take a prospective employee more seriously if he has his Series 3 license in hand. The new derivatives broker should look for an employer whose training program includes substantive training in trading, and avoid brokerages that focus on sales to the exclusion of all else.

Whether one wishes to become a derivatives broker in America or in Europe, developing new business is an expected part of the job. Publishing articles on trading creates credibility and increases the odds of success at any sales call. New business translates to increased income and independence for a derivatives broker.

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