Set Up a Commodity Trading Business in the UK

How to Set Up a Commodity Trading Business in the UK 3E Accounting explores the intricacies of how to set up a commodity trading business in the UK.

If terms such as futures and derivatives bring a gleam to your eyes, then commodity trading might be your ideal venture. The United Kingdom is possibly one of the best places to do so, especially with its ease of doing business status. It offers a competitive tax regime, has a well-established legal structure and a highly talented, diversified workforce. Hedge your bets by knowing how to set up a commodity trading business in the UK.


A Place to Trade

The UK has a long history with commodity trading. One of its most prominent moments occurred in the 1970s with the Brent Crude benchmark. The UK continues this trend of prestige and hosts many global exchanges and trading firms.

The term ‘commodities’ in relation to trading can be defined as unrefined materials that can be bought or sold. Commodities can be soft or hard and include agricultural products, metals, energies such as natural gas, etc.

Trading is done on exchanges, similar to the stock market, which includes the London Metal Exchange (LME), etc. Whether you make a profit or loss depends on prices rising and falling. This depends on factors such as market demand, global politics, season and weather, etc. Commodities are traded:

  • Physically: wholesale markets as either spot trades or forward contracts.
  • Derivatively: commodity exchanges with futures and options.

You can start a commodity trading business in the UK by first doing your due diligence. Your business plan should have scalable and viable information on relevant market research, financial forecast and the type of trading. Your business can be a commodity dealer or broker, each with is unique skillsets. You will also need to do research and choose the commodity that you want to trade-in.

Also, consider how you want to trade, i.e., do you want to invest or trade. This can include exchange-traded funds (ETFs), futures and options and contracts-for-differences (CFDs). Knowing how commodity trading itself works is the key to success.

Registration of your business is done with Companies House, where you can incorporate a limited company or an LLP (limited liability partnership). You will also need to register with HMRC for taxes and ascertain your financial year-end for filing deadlines. Other considerations include renting a serviced office and setting up a website for your business. You will also need to set up a commodity trading account for your business.

Last but certainly not least, do ensure that all licenses and permits are in order before you start your business. In the UK, the Financial Conduct Authority (FCA) regulates commodity markets and firms. This is done in accordance with the Financial Services Act 1986 and the Financial Services and Markets Act 2000. It includes options on financial instruments, futures as well as contracts for difference.

If you have a talent for understanding and making smart trades, then commodity trading is a good business to start. 3E Accounting provides professional assistance and guidance on how to set up a commodity trading business in the UK. Our team of experts can assist in all aspects of company formation, including banking and compliance. Contact 3E Accounting today to access an international network of experts and customisable business solutions.How to Set Up a Commodity Trading Business in the UK