Eligible Commercial Entity


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.

BREAKING DOWN '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.

  1. Hedge

    Making an investment to reduce the risk of adverse price movements ...
  2. Derivative

    A security with a price that is dependent upon or derived from ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with ...
  4. Market Maker

    A broker-dealer firm that accepts the risk of holding a certain ...
  5. Futures Contract

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

    1. In derivatives, the security that must be delivered when a ...
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  3. Can mutual funds invest in commodities?

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  5. Why do companies enter into futures contracts?

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