Difference b/w interdealer broker and trader

I have an interview with this commodity brokerage firm that focuses on OTC markets and especially crude oils. I have a few questions. 1) What’s the difference between a commodity broker at a brokerage firm and a commodity trader at, say, an investment bank commodity trading desk? 2) Is starting out career at a commodity brokerage firm good? What are some of the possible exit opportunities? Is it also going to be automated just like traders? 3) What do you guys think about the learning curve? 4) How much would you expect to earn in the first year as a junior broker? Thanks.

  1. Traders at banks or other institutions are principal dealers, meaning they use their firms’ capital to take positions and risk. Brokers do not take positions themselves; they only communicate markets between different dealers. You should search the internet if you want more explanation on principal vs agent functions.

  2. I don’t know what you mean by “good”. If you’re unemployed, and job is good. To answer your other questions though, there are virtually no direct exit opportunities from interdealer brokering. If you want to compare this field with other finance jobs, you’d better hope to make a lot of money soon (which some people do, or did). There is a very high risk of automation as well, even more than in trading functions in banks. Furthermore, commodities trading is struggling at most banks, and this will create headwinds for brokers who serve those businesses.

  3. There is almost no “learning curve” in an academic sense. In fact, 90% of brokers have no idea what their products accomplish or why banks are trading those products. While banks recruit from Ivy League schools, brokerages tend to pick random people based on personality more than anything. However, there is a very high barrier to success in what I call the “relationship curve”. Brokering is a customer management business. You succeed by cultivating “friendship” and trust with clients.

  4. You’re going to start as a clerk probably. I’d say you’ll make less than $100k, but you should ask the people at the company.

In today’s world, unless you are a prop trader or a proprietary trader - those who trade company’s own capital mostly at full discretion within its own asset class or strategy - which is very small in numbers after the financial crisis…you will be a sell side trader or basically a salesman…but these traders never call themselves salesman or sell side trader, they call themselves the Trader! haha

Their desk within the bank is called sales desk…Here is what happens:

  1. I work at XYZ Capital…An analyst proposes we buy some shares of Amazon. I am the PM and says okay after reviewing his/her reports and going over our risk/allocation etc.

  2. I tell our trader - Buy Side Trader - that hey buy X shares of Amazon at the best price you can…

  3. Our trader then orders directly through his BBG terminal OR will call Sell Side traders at say Guggenheim, JP, or Citi to look for best price…The trader will buy at the best price but usually calls his/her friends first…

  4. The sell side trader answers the call or IM from the buy side and quotes him a price…Done at Y dollars a share.

  5. Both the buy side and sell side then fill out a little trade blotter or their assistants will - share price and number of shares - for the back office to book into their system.

In my honest opinion, trader job is a dead end job unless you are programming stuff or have full discretion over your books…BUT traders at these IB brokerage firms do not have such discretion…They do however have inner network of fellow sell side and buy side traders…but in the world of automation (look at the link)…


These traders are really no different than real estate brokers…hence these traders work at a brokerage firm…These traders broker the deal between the buyer of stocks/bonds with the seller of stocks/bonds…They don’t “trade” as you hear over and over again in the media…The media is 10 years behind saying “the Dow is down 200bps today…the traders are saying the tariff…and putting more pressure on the downward trend”…The traders are putting in the trades but they are following orders from either a senior analyst or PM or CIO from the buyside.

I think your view on this is quite narrow, just like my view would be narrow if I said buy side analysts just waste peoples’ money in fees and lose to the market 80% of the time.

as a buy side analyst I actually agree with your argument/comment above - on both fronts.

My reply to OP was not - although it may have come off as otherwise - to negate or contradict your reply…My reply about Traders is merely from what I see as an analyst which is hugely biased by my own views and those above me in my career path - PM and CIO.

But the latter part of my post that traders are becoming a dead end jobs in finance, I hold my ground.