DEFINITION of 'Commercial Trader'

A classification used by the Commodity Futures Trading Commission (CFTC) to describe traders that use the futures market primarily to hedge their business activities.

BREAKING DOWN 'Commercial Trader'

This type of classification is usually given to futures commission merchants, foreign brokers, clearing members or even investment banks that buy index futures to hedge current long positions. An increase in commercial traders' long positions in a certain commodity may mean these traders believe the price of the commodity will increase, in which case they would not want to be adversely affected by missing out on a price increase.

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