amt
That is a rather vague discrription of "COMMERCIALS",
The commercials are the actual buyers/sellers of the "ACTUALS", the actuals are more comonly known as the "CASH" products. That and this is a rather simplified description but valid ones.
Players Involved in Commodities Trading
There are three different types of players in the commodity markets:
1.Commercials: The entities involved in the production, processing or merchandising of a commodity. For example, both the corn farmer and Kelloggâs from the example above are commercials. Commercials account for most of the trading in commodity markets.
2.Large Speculators: A group of investors that pool their money together to reduce risk and increase gain. Like mutual funds in the stock market, large speculators have money managers that make investment decisions for the investors as a whole.
3.Small Speculators: Individual commodity traders who trade on their own accounts or through a commodity broker. Both small and large speculators are known for their ability to shake up the commodities market.
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Now, in real life so called commercials are better known as hedgers. Hedgers are price adverse players, they do not speculate in price movement like speculators do. As traders we are specs because we want to be rewarded for accepting the price risk the hedgers are laying off to the futures market. Thats the business rational of the futures mkt in the first place, to transfer risk of a huge crop, etc to the specs who are willing to risk the grocery money to make some cash. Hedgers in general are not mkt speculators, it is a business not a gambling house at Cargill and other well known commercials. Farmers also in general are not specs for fear of betting the farm he could lose it. (not a cliche)
There is "ZERO" inside information in commercials trading in the futures mkts like there is INSIDE info in the stock of a public company. What the hedger knows about the crop condition, the demand or lack of demand, who is buying, who is selling etc, etc are their own projections and thats what they base their business on. They conceal their trading in the mkts as much as possible to not let the other hedgers get a clue about price etc.
Thats a simplified explanation but a very valid one. History has shown that big commercials that speculated in the futures mkts are not around for long. The futures mkts were originally formed as RISK TRANSFER from the business man to the specs on the street. Insurance companies do the same thing but in general we are FORCED to take out mandatory insurance on the car, house etc, etc. As taxpayers we are now forced to bail out the fuckheads on wall street that gambled the farm and lost.
When was the last time a futures mkt had to be bailed out? Right, when the contracts are all sent to a clearing house, everyone has an interest to not screw the little guy. ...END....
PS: Farmers are not really commercials, farmers are better known as producers on a small scale. Yes some farmers are very large but not known as commercials in the real sense of the word.
Stock exchanges seem to always want to fight amoung themselves and screw the little guy, unlike future exchanges. like i always say: get MODERN, trade futures.
http://www.reuters.com/article/governmentFilingsNews/idUSN1841430520090619