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Old 15-07-2016, 09:27 AM
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Quote:
Originally Posted by chocobobo View Post

2) What is the differences between trader and broker?
I'm not in the business of oil trading. But I'll answer this question in the domain of currency trading, which is my speciality. I believe this is applicable to the trading part of oil trading.

But before that, maybe it's better that we learn the distinction between the buyside and the sellside in any sort of trading business. There are traders at both ends.

Sell side: makes the market, matches orders, quotes a price for the client. Almost always should be market neutral, meaning they don't have a view on where the market is going. Just think of them as 'the market' where people go to get an order filled.

Buy side: Goes to the market, the sell side, and buys or sells products. They trade based on their function - speculation, hedging or currency overlay. You can think of them as have a view of the market, and expressing that view by risking their capital.

The broker that you mentioned exists in the sell side. Now for the distinction between trader and broker, both of which are at the sell side.

Essentially, the trader manages risk. They match orders to ensure that they are market neutral. Because of this function, they have a feel of what prices need to be quoted for various products to 1) earn money from a spread 2) stay market neutral. The broker than takes this price to the his clients on the buy side when 1) his client wants to trade or 2) suggesting to his client to trade. Think of the broker as the middle man between the market / trader and his clients.

Exception: seldom the trader IS the broker depending on how the sell side trading business is run. Usually if the business trades a lot of products, you'll need a trader to focus on the pricing and have another guy, the broker, do the quoting to the clients. Also, another term for broker is dealer, which is used when dealing with institutions.
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