Business Entity In the commodity futures markets, a qualifying business entity (STE) is a type of marketing participant authorized to make or take delivery of the commodities underlying one or more futures contracts.

Appropriate business entities may also provide commodity traders with market-making and risk management services.

Key Points To Remember Business Entity

  • A qualifying business entity is a company licensed to manufacture and take delivery of commodities through commodity futures trading.
  • They also act as advisors and market makers, adding liquidity to the market.
  • Their requirements are conventional in the Commodity Exchange Act (CEA), and their activities are take by the Commodity Futures Trading Commission (CFTC).

How Qualifying Business Entity Work

The definition of a qualifying business entity work and the requirements for acting are usual in the Commodity Exchange Act (CEA). According to these regulations, individuals cannot become qualifying business entities or instruments of the state.Thus, a qualification that allows credit unions, community welfare credit associations, and privately-owned insurance brokerage firms is no longer applicable.

The Commodity Futures Trading Commission

The system of the commodities market where prices are set following the regulation of the Commodity Futures Trading Commission, in other words products which operate under thiss, while other producers are either trading or storing their goods, offer the market users the opportunity to prearrange for the delivery of the commodity at a specific time in the future. This will see the consumers and producers in commodity trade pay less attention to artificial price link variations which tends to make them more accomplished at local value chain management by smoothing out situations of rampant commodity price fluctuations which may hinder their profitability. this will result in these categories of people being more adept at strategically controlling their value chains by circumventing situations where their profitability is eroded by the rampant commodity price fluctuations. Commodity futures markets also offer market participants an opportunity to wager on the future prices as well as a means of covering for the exposure of commodity.

Qualifying Business Entities (QBEs) do this job well by making a pricing instrument to help commodity futures market players interact among each other. These trading partners have the resources financial and human to meet their part commodity trade and even to provide for shipment of goods in the event of delivery failure. Another thing which qualifying business institutions can do is to act on behalf of clients as consultants facilitate such transactions and also provide liquidity to the market by taking the role of market makers who buy and sell futures contracts on their accounts.

Actual Example Of A Qualifying Business Entity

To illustrate how qualifying business entities can impact the market, suppose you own a commercial bakery business that sells bread across the United States. Of course, you know your equipment, personnel, and logistics costs intimately. Still, because the price of wheat fluctuates in international commodity markets. You can’t be sure what that critical price will be throughout the year.

To reduce this uncertainty, you decide to set a reasonable price for wheat by buying futures contracts with grain as the underlying commodity. These contracts are structure to mature at different times of the year, giving you the option of receiving wheat on those maturity dates or selling the futures contracts, buying wheat elsewhere using the proceeds of the sale.

To complete this transaction, you are turning to a qualifying business entity. Specifically a brokerage firm that offers expert knowledge of the wheat futures market. And advice on how best to execute the futures transaction. Once the transaction details are complete. The eligible business entity is authorize to complete the transaction on your behalf.

There are also non-commercial entities – in the strict sense of the term – whose purpose is often social or otherwise. Such as the State, local authorities, non-profit associations, etc.

In the majority of cases, the commercial entity serves as a utility function . An instrument or a mechanism to solve one or more concrete business problems : A real estate project; building infrastructure. Joint creation of a manufacturing plant; etc.


Business Entity In the commodity futures markets. A qualifying business entity (STE) is a type of market participant that is authorize to make or take delivery. Of the commodities underlying one or more futures contracts.

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