Regardless of bull or bear markets, the industry has received a boost from the increased use of commodities.
Los Angeles, CA (PRWEB) February 14, 2012
Because the volume and volatility of the commodity markets drive the Commodity Dealing and Brokerage industry, it has been on a roller-coaster ride since 2005. According to IBISWorld industry analyst Doug Kelly, the industry has experienced three distinct phases over the period: booming growth that led many commodities to hit historical highs, a crash in late 2008 as a result of the recession and beginnings of recovery. Despite the volatility, industry revenue is expected to increase 4.0% annually to $17.5 billion over the five years to 2012, including a projected 5.4% increase in 2012. This positive growth clearly masks the volatility this industry has been through.
Regardless of bull or bear markets, the Commodity Dealing and Brokerage industry has received a boost from the increased use of commodities. Traditionally used as a hedge against inflation and future risk, commodities have become a valuable diversification tool. Use of commodities has also increased because of strong returns generated by speculators. "These strong returns and diversification benefits have led to a rise in the use of commodities in pension funds and hedge funds," Kelly says. In the five years to 2017, the industry will experience strong growth. Shaky investor confidence combined with low interest rates will stoke inflationary fears, which will increase commodity-trading activity. Also, regulation will help the industry through 2017. Improved transparency and the use of central clearing will shore up the industry's position as a respectable branch of the financial services market.
Industry concentration in the Commodity Dealing and Brokerage industry is at a medium level, with the top four firms holding almost half of the market share of industry revenue. Falling commission prices and technology changes partly drive industry consolidation, which allows trade execution to take place without a broker. This gives an advantage to larger brokers that offer a range of value-added services, such as clearing and research. Industry consolidation is expected to increase in the coming years as smaller firms find it more difficult to compete with Wall Street and Chicago giants in technology, broker talent and client acquisition. Expect JP Morgan Chase & Co., Morgan Stanley, Bank of America Corporation and The Goldman Sachs Group Inc. -– the top players in this industry – to increase their market share directly through acquisitions and indirectly through other firms that reduce or exit their commodities activities. For more information, visit IBISWorld’s Commodity Dealing and Brokerage report in the US industry page.
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IBISWorld industry Report Key Topics
The industry includes companies and individuals that act as brokers and dealers in the commodities market. Brokers are individuals who trade commodities futures on the behalf of clients, while dealers trade for their own accounts. Commodity futures are contracts to buy a predetermined good at a specific price and date in the future. Steel, corn, wheat, oil and gold are examples of commodities on which future contracts can be written.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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