Eligible Commercial Entity

AAA

DEFINITION of 'Eligible Commercial Entity'

A contract participant who has proven abilities in risk management related to commodity trading and accepting or delivering the underlying commodities of a futures contract. The eligible commercial entity may be a dealer for hedging and risk management tools, or act as a market maker in commodity or derivative transactions. The requirements for eligible commercial entities are found in the Commodities Exchange Act.

INVESTOPEDIA EXPLAINS 'Eligible Commercial Entity'

Eligible commercial entities share the same requirements as eligible contract participants. Financial institutions and investment or insurance companies may become eligible commercial entities, however, natural persons are restricted from this title. Entities, who might not satisfy all eligibility requirements, may also seek approval for this status by the Commodity Futures Trading Commission.

RELATED TERMS
  1. Commodity

    1. A basic good used in commerce that is interchangeable with ...
  2. Derivative

    A security whose price is dependent upon or derived from one ...
  3. Hedge

    Making an investment to reduce the risk of adverse price movements ...
  4. Underlying

    1. In derivatives, the security that must be delivered when a ...
  5. Futures Contract

    A contractual agreement, generally made on the trading floor ...
  6. Market Maker

    A broker-dealer firm that accepts the risk of holding a certain ...
RELATED FAQS
  1. What are some of the major regulatory agencies responsible for overseeing financial ...

    There are a number of agencies assigned to regulate and oversee financial institutions and financial markets, including the ... Read Full Answer >>
  2. What types of corporations would be expected to have higher growth rates than more ...

    Investors looking for corporations with higher-than-average growth rates have several factors to consider. Although younger ... Read Full Answer >>
  3. Which federal regulatory agencies approved and are now responsible for enforcing ...

    Five federal regulatory agencies approved and are jointly responsible for enforcing the Volcker rule. These agencies include ... Read Full Answer >>
  4. How are commodity spot prices different than futures prices?

    Commodity spot prices and futures prices are different quotes for different types of contracts. The spot price is the current ... Read Full Answer >>
  5. How do commodity spot prices indicate future price movements?

    Commodity spot prices indicate future price movements because commodity futures prices are calculated using spot prices. ... Read Full Answer >>
  6. Where did market to market (MTM) accounting come from?

    Mark to market accounting has been around in concept since the stock market began; however, it was not officially part of ... Read Full Answer >>
Related Articles
  1. Active Trading

    Commodities: The Portfolio Hedge

    These diverse asset classes can provide downside protection and upside potential. Find out how to use them.
  2. Options & Futures

    An Introduction To Managed Futures

    Their inverse correlation with stocks and bonds make these alternative investments worth getting to know.
  3. Options & Futures

    Money Management Matters In Futures Trading

    Learn how this overlooked area of trading can help improve your gains.
  4. Active Trading

    How Companies Use Derivatives To Hedge Risk

    Derivatives can reduce the risks associated with changes in foreign exchange rates, interest rates and commodity prices.
  5. Insurance

    Futures Fundamentals

    For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
  6. Investing Basics

    What Does Spot Price Mean?

    Spot price is the current price at which a security may be bought or sold.
  7. Investing Basics

    What Does a Clearing House Do?

    A clearing house is a third-party agency or separate entity that acts as a go-between for buyers and sellers in financial markets.
  8. Investing Basics

    What is Meant by Implied Volatility?

    The estimated volatility of a security's price.
  9. Economics

    How Gloomy Headlines Support Eurozone Stocks

    It's hard to miss the many headlines on Europe lately with news ranging from Greece’s debt saga to the details of ongoing European Central Bank stimulus.
  10. Chart Advisor

    Expect These Gold-Related Assets To Move Lower

    The spot gold price is trading within a long-term descending triangle. Traders may use this pattern to suggest gold and related assets are heading lower.

You May Also Like

Hot Definitions
  1. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  2. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  3. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  4. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  5. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  6. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!