The Real Difference Between a Broker and a Trader

Paul Hardy, Nautical Supply International Ltd, (NSI)

As a trader I essentially made my money 'knowing what others don't know' or what is known as 'proprietary' information. When I say trader I do not mean 'back to back' which, in most industries is known as a reseller. This is a separate and valuable skill but involves no real proprietary information. Instead it is a skill based on deal by deal challenges and involves little long term planning.

What I would term a trader is someone who analyses the markets, finds arbitrages between pricing areas, structures term contracts, manages hedging strategy and sells to client on term and spot basis. This involves a multi-faceted approach and long term strategy. The large trading houses diminished this skill a long time ago through the use of 'specialisation'. They separated purchasing, sales, financing and hedging. It is a clever strategy as no one employee has an overview which reduces risk if employees leave and over time diminishes the income/role of the trader.

As a former trader I was struck by the fact that my value was directly correlated to how tightly I held onto the proprietary information I had. In essence 'in the land of the blind the one eyed man is king!".  This of course puts you at conflict with others within a trading house who would like you  to share that information. What strikes me as a broker now is the freedom to share that information. I make my money  by sharing what I know with everyone. It is a nice space to be in and what's more others share with me what I don't know (which is a lot).

So looking at the challenges for the market going forward. If I am a predominantly 'back to back' trading company how do I suddenly switch mindset from deal by deal profit to longer term planning with 2020 approaching? Secondly, if I am a highly specialised trader how do I bundle that knowledge together to give an overview to clients to help plan?  Lastly, if I am stuck in the middle and have employees with proprietary information how do I persuade them to share it? These are the big challenges I believe facing the trading companies as 2020 approaches.

As brokers we have a more naturally open philosophy and so we can share and prepare as a group. As we are also focussed on long term planning with our clients we have the necessary trust and dialogue with them to openly work out the best strategy. As brokers our challenge has been to understand not only the spot market but the term and hedging markets. I believe that is where my experience of that 'proprietary information' comes into play. What's more I am now happy to share it with everyone! So if you are an owner looking to plan towards 2020 or looking at term contract options, or a supplier wanting to implement a hedging programme please give me a call. Now as a broker my door is always open and my 'margin' is transparent.