Eligible Commercial Entity

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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.

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RELATED FAQS
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    Mutual funds can invest in commodities. In fact, mutual funds may provide a better way for investors to gain exposure to ... Read Full Answer >>
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    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
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    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>
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