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What is a Trade House?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 13 November 2016
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    2003-2016
    Conjecture Corporation
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Trade houses are business firms that work with the physical commodities that are traded on the open market. Unlike a brokerage house that focuses on the buying and selling of securities, the trade house takes the process one step further. This type of business will not only buy and sell a commodity, but also provide storage when necessary.

One of the easiest ways to understand how a trade house operates is to look at the activity surrounding one physical commodity. Silver is a commodity that is physical in nature. When working through a trade house, the investor has the chance to purchase silver commodities by executing orders through the firm. In the event that the investor chooses to hold onto those commodities for a period of time, the trade house can also provide storage for the actual silver. The silver can remain in the possession of the trade house until the investor chooses to sell off the investment. At that time, the new owner may choose to continue housing the commodity with the trade house, or make arrangements to move the physical commodity to a new location.

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The trade house provides a simple means of handling all aspects of trading a physical commodity under one simple umbrella. There is no need to pay storage fees at some other location. In addition, housing a physical commodity at a trade house means it is easy for prospective investors to obtain guaranteed assessments of the condition and worth of the lot involved in the commodities trading. It is not unheard of for investors to be allowed to actually see the commodity being traded, although this is not always the case.

When it comes to the purchase and sale of the commodities, the trade house is just as effective as any type of brokerage or dealer situation. Agents are able to provide up to the minute market information that can help investors make intelligent trading decisions. At the same time, the trade house can execute orders with the same efficiency as any brokerage. If an investor prefers to deal with futures or other options involving physical commodities, a trade house is an excellent avenue to explore.

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