The evergreen appeal of commodities being traded between buyers and sellers means that they continue to be a popular target of the investment community. It’s possible to take a view on future price moves using technical and fundamental analysis, but there’s something intrinsically appealing about using anecdotal evidence relating to everyday items being in short supply.
There is some degree of personal preference involved in the selection process, so we’ve compiled a list of trusted brokers that all offer a great service. Security of funds is paramount, and there’s nothing more disappointing than making the right call on oil, gold, copper or cotton to then find that your broker isn’t legit and that you can’t get your profits or even your initial funds back. All of the below brokers are regulated by Tier-1 regulatory authorities such as the Monetary Authority of Singapore (MAS).
Plus500 is a global broker with a growing client base. Recent steps to provide high-quality commodity trading services to citizens of Singapore have seen it apply for and obtain regulatory approval from MAS. It has a strong track record and an appetite for providing its clients with a range of user-friendly and innovative ideas.
Plus500 offers traders a simple and secure trading experience and access to energy, metal and soft commodity markets. The commodity markets on offer are traded using CFDs, so clients can sell short as well as go long and take advantage of leverage offered by the broker, and scale up on risk-return.
This all adds up to making the Plus500 trading experience one of the best in the market, and registering for a risk-free demo account is highly recommended.
Singapore-based clients operate using trading limits set by MAS. Maximum leverage is accordingly 1:20.
Plus500SG Pte Ltd (UEN 201422211Z) holds a capital markets services licence from MAS for dealing in capital markets products (Licence No. CMS100648-1) (Source: Plus500).
Office Address: Plus500SG Pte Ltd, 1 Temasek Avenue, Millenia Tower #37-03, Singapore 039192.
eToro is about ease of use. The super-reliable platform has functionality that means that new clients can sign up and be trading commodity markets within minutes. Trade management can be done using the desktop platform or eToro app, which is available on iOS and Android devices, so traders can always keep on top of their portfolios at all times.
Behind the user-friendly dashboard is a very comprehensive trading infrastructure. It is, for example, possible to trade a very wide range of commodities. There are 31 markets in total, so even more ‘exotic’ markets such as cotton, cocoa, nickel and sugar can be accessed.
For those who want to trade their own commodity ideas, there is a range of charting tools, trade entry indicators and in-depth research notes to help with strategy planning. The social trading and copy trading features on the eToro platform are very useful. Clients can use the same account to book trades based on their own ideas or those of other traders, and the copy trading service comes at no extra charge.
Selecting which trader to follow is made easy by the filtering function on the platform. This allows you to sort through traders using criteria such as where they are based, risk-profile and track record. If a particular commodity market interests you, then set the filters to match and you’ll find thousands of lead traders willing to share their ideas. If things don’t work out as planned, it is possible to end the copy trading relationship at any time.
eToro is a global broker and regulatory protection will be based on a client’s country of residence. Authorities that the firm holds licences with include the FCA (UK), ASIC (Australia), CySEC (Cyprus), GFSC (Gibraltar), FinCEN and FINRA (US).
eToro (Seychelles) Ltd. is licensed by the Financial Services Authority Seychelles (FSAS) to provide broker-dealer services under the Securities Act 2007, Licence #SD076.
Pepperstone built its reputation as one of the world’s leading forex brokers but has always been strong in commodities. The Australia-based firm’s high-level service proved so popular that its client base grew to be global and the number of markets it offered also expanded.
The broker now offers a high-quality commodity trading experience in an impressive range of markets. The market staples such as oil, gas, gold and silver are included, but so are more diverse commodities such as lean hogs, soybeans and corn. Additional features that help clients set up in the best way possible include the award-winning customer service and in-depth but jargon-free training webinars and market reports, which are available in video as well as written format.
Pepperstone Group Limited (pepperstone.com/en-au/) is headquartered at Level 16, Tower One, 727 Collins Street, Melbourne VIC 3008 Australia and regulated by ASIC (Australian Securities & Investments Commission).
Pepperstone Markets Limited (pepperstone.com/en/) has the registered address Sea Sky Lane, B201 Sandyport, Nassau, New Providence, The Bahamas and is regulated by the SCB (Securities Commission of The Bahamas).
Global clients of Pepperstone are allocated regulatory protection according to where they live.
IG offers a state-of-the-art trading platform that has access to an almost unrivalled range of commodity markets. The firm is well-regulated, provides an ever-popular platform choice to clients, and comes with competitive pricing.
Over the decades that it has been operating, the firm has built up an incredible number of additional services, including its own TV channel. It broadcasts market news reports, shares ‘The Week Ahead’ reports with clients so that they can prepare for upcoming events, and also offers ‘Trade of the Week’ ideas.
In terms of market coverage, IG supports trading in all the main markets, but there are even two different wheat markets to choose from. This coverage is useful for Singapore commodity traders as some of the more obscure markets can be the ones that see dramatic price moves – the eye-watering price rises in lumber in 2021 being a prime example.
IG Asia Pte Ltd (Co. Reg. No. 200510021K) with registered address Straits Trading Building, 9 Battery Road #01-02, Singapore 049910 holds a capital markets services licence issued by MAS for dealing in capital market products that are over-the-counter derivatives contracts and is an exempt financial adviser.
Commodities are assets that are interchangeable, so oil drilled in Nebraska and oil drilled in Nevada have to be similar enough in nature to be categorised as West Texas Intermediate crude. Once that fact has been established, a refinery that orders WTI crude will be sure to know that what it is buying suits its purposes.
Standardised units are also applied. In the case of oil, these are barrels, and in the wheat market, the commodity is traded in ‘bushels’, which equate to 60lbs or one million wheat kernels. These processes have built up because commodity trading originates from industrial parties buying and selling actual assets used for economic production.
The recent revolution in online trading has democratised the investment industry and allowed traders to speculate in the commodity markets. Even if you’re not a chocolate manufacturer, you can still buy and sell cocoa products using the trading platforms on offer.
It’s easy to set up a brokerage account with Singapore commodity brokers, and the process is carried out online and takes minutes to complete. Once onboarded to a platform, account holders can head to the commodity section of the site and select which market they want to trade.
Industrialists and commodity merchants operate on the ‘for delivery’ market. If you buy a bale of cotton in the US in the futures ‘for delivery’ market, then on expiry date a lorry will turn up with a bale of raw cotton weighing 470lbs to 480lbs. The financial markets are full of anecdotes of professional traders making such a mistake and looking out of their Wall Street office window to see lorries containing some kind of commodity outside the office front entrance.
Online brokers offer a more convenient approach. They offer clients the opportunity to trade in commodities using CFD (contract for difference) instruments. Fundamental principles relating to market price apply. If you buy a commodity in CFD form and the price goes up, you make a profit. If it falls, you make a loss. When you open an online commodity trading account in Singapore and transfer funds into it, those will be used as a deposit, or stake, to support your trading activity.
Commodity trading is therefore reliant on your broker being able to pay any profits that are made on trades you place with it. This means that using a trusted and viable platform is essential. In CFD trading, you don’t have a position in the underlying commodity, such as natural gas, but an agreement with the broker.
Reputable firms – those with a business model based on delivering an attractive service to clients – have realised that demonstrating good governance can attract customers. They’ve also invested in applying to be authorised by a regulatory body such as MAS. All these steps provide potential clients with extra security.
Investors and traders who use a MAS-licensed commodity broker will be protected by regulatory protocols. There is also the option to take complaints to the regulator if they aren’t properly addressed by the broker.
It’s completely legal for Singapore citizens to use a broker that is not regulated by MAS, and other brokers operate under licence from other regulators. As long the regulator is one of the below Tier-1 authorities, then the box is ticked in terms of broker reliability.
Online brokers invest a lot of time and money in gaining a licence and then meeting the ongoing reporting requirements. They also have to demonstrate to the regulator that they have enough cash on hand to make good all their outgoing payments to clients. If a broker opts to be regulated, then this is a sign that it is a legit business that intends to be operating for years to come – something that is crucial in the CFD markets.
The above list of brokers includes firms that are all regulated by Tier-1 authorities, and there’s also a bonus feature. Fierce competition in the Singapore commodity broker sector means that the firms must compete with each other to gain new business. Some, for example, provide exceptional research and learning resources; some offer super-low trading costs; while others offer a good all-round service.
Trying the demo accounts of the above Singapore CFD brokers is a risk-free way to test the service that each offers and develop some trading skills at the same time.
Commodity markets can experience dramatic long-term price trends. Global events such as the commodity super cycle work on supply and demand for some assets undergoing long-term mismatches. It takes time to discover and open up new oil fields or gold mines, so supply sometimes just can’t keep up with demand.
Getting an understanding of how to take advantage of trends can help squeeze the best possible returns from some trends. Another tip is to check your broker’s terms and conditions to ensure that you don’t leave too much money on the table in terms of servicing costs. If your investment strategy is long term in nature, then some attention paid to details such as financing costs, and considering switching to the best-fit broker, can pay off.