Glossary
OTC brokerage and commodity market terms
Plain-English definitions of the terms brokers, ops teams and compliance use every day, from tickets and confirms to commodity products and recordkeeping rules.
14 terms
Trading and brokerage
How OTC deals are agreed, written up and charged for.
- OTC (over-the-counter)
Over-the-counter (OTC) trading is trading agreed directly between two parties, often through a broker, rather than on an exchange. The parties set the terms themselves, so OTC contracts can be standardized or tailored to the deal.
- Broker vs principal
A broker arranges trades between a buyer and a seller and is paid a commission, without taking a position in the trade itself. A principal trades for its own account and is a party to the deal.
- Deal or trade
A deal, or trade, is an agreement between a buyer and a seller on a product, quantity, price and delivery terms. In brokered markets a deal is usually agreed by phone or chat and then written up on a ticket.
- Ticket
A deal ticket is the record of a trade's terms as booked: the buyer and seller, product, quantity, price, delivery period and commission. It's the source for the confirm, the invoice and later reporting.
In APACT: Each ticket holds both sides of the trade, down to company, entity and trader.
- Recap
A recap is a short summary of an agreed deal's key terms, sent to the parties soon after the deal is done so each side can check them. It usually comes before or alongside the formal confirm.
- Blotter
A trade blotter is the running list of a desk's or a firm's trades, with each trade's key terms and status. Many brokerages keep it in a spreadsheet.
In APACT: The blotter lists every trade with status, desk, buyer, seller, commission and trade value, and exports to CSV.
- Counterparty
A counterparty is the other party to a trade. For a broker, the buyer and the seller on each deal are both counterparties, and each is usually a company trading through a specific legal entity and trader.
- Legal entity
A legal entity is the specific company, such as a parent, subsidiary or affiliate, that is legally bound by a trade. A trading group may have several entities, so the confirm and the invoice need to name the right one.
- Desk
A desk is a team of brokers or traders that covers one market or product group, such as a crude desk or a power desk. Firms often track trade value and commission by desk.
- Bid and offer
A bid is the price a buyer is willing to pay, and an offer (or ask) is the price a seller is willing to accept. The gap between the best bid and the best offer is the spread, and a trade happens when a bid and an offer meet.
- Spot vs forward
A spot trade is for delivery straight away or within the market's short standard window. A forward trade fixes the price today for delivery on a later date or over a later period.
- Delivery period
The delivery period is the date or date range in which the product is to be delivered or transferred, such as a month, a quarter or a calendar year. It's one of the core terms on the ticket and the confirm.
- Brokerage (commission)
Brokerage, or commission, is the fee a broker charges for arranging a trade. In many OTC markets both the buyer and the seller pay the broker a commission.
In APACT: One commission is set on each trade and APACT works out the dollars. It's billed to each counterparty on that company's invoice.
- Commission bases
A commission basis is how a commission is calculated: as a percentage of trade value, in basis points of trade value, as a flat amount per trade or as a rate per unit, such as per barrel, per gallon or per metric ton.
In APACT: Each trade's commission is set on the ticket as a percentage of trade value, basis points, a flat amount or a rate per unit, and APACT works out the dollars. Units beyond barrels, gallons, metric tons and credits are set up at onboarding.
6 terms
Post-trade
What happens after a deal is done, from confirm to invoice to the close.
- Confirm (trade confirmation)
A trade confirmation, or confirm, is the written record of a trade's terms sent to the parties after the deal is agreed. Each side checks it against its own records so errors are caught before delivery and payment.
In APACT: APACT builds the confirm from the ticket and emails it to buyer and seller. Each send shows on the trade's timeline.
- Invoice
A brokerage invoice bills a counterparty for the commission on one or more trades. It lists the trades, the rates and the amount due.
In APACT: Booking a trade doesn't invoice it. On the brokerage's billing cycle, someone creates each company's invoice for the period from its available trades, then saves a draft or sends it. Each invoice moves from draft through sent, paid, overdue or cancelled.
- Accounts receivable (AR)
Accounts receivable (AR) is money owed to a business for services it has billed but not yet been paid for. For a brokerage it's mostly unpaid commission invoices, often reviewed by age in an aging report.
- End-of-day (EOD) report
An end-of-day (EOD) report summarizes a desk's or a firm's trading at the close: the day's trades, trade value, commission and anything that needs follow-up.
In APACT: APACT's EOD reports cover the firm, each desk and each broker: trade value, commission and volume by product and broker, top counterparties and traders, and day, month and year changes. View them, email them, or download CSV or PDF.
- Give-up
In a give-up, the firm that executes a trade passes it to another firm, usually the customer's clearing firm, which accepts it and carries the position. It's common when a deal agreed off-exchange is submitted to an exchange for clearing.
- Cleared vs bilateral
A cleared trade is taken on by a clearinghouse, which becomes the buyer to every seller and the seller to every buyer, and both sides post margin. A bilateral trade stays between the two original parties, who carry each other's credit risk under their own agreement.
9 terms
Commodities and units
Common products, units and delivery terms across energy, metals and agricultural markets.
- Barrel (bbl)
A barrel is the standard unit for crude oil and many refined products in US markets, equal to 42 US gallons. Crude benchmarks such as WTI are quoted in dollars per barrel.
- ULSD (ultra-low sulfur diesel)
Ultra-low sulfur diesel is diesel fuel with no more than 15 parts per million of sulfur, the US standard for on-road diesel. Benchmarks such as New York Harbor ULSD are quoted in dollars per gallon.
- RBOB gasoline
RBOB (reformulated blendstock for oxygenate blending) is a gasoline blendstock made to be blended with ethanol into finished reformulated gasoline. New York Harbor RBOB is a common US gasoline benchmark, quoted in dollars per gallon.
- MWh (megawatt-hour)
A megawatt-hour is one megawatt of electricity delivered for one hour. Wholesale power trades and prices are usually quoted per MWh.
- On-peak and off-peak
Power is traded in blocks of hours. On-peak usually means weekday daytime hours (in many US markets, 16 hours a day Monday to Friday, excluding certain holidays) and off-peak the remaining hours. Exact definitions vary by market.
- MMBtu
One MMBtu is one million British thermal units, the standard unit for pricing and trading natural gas in North America.
- Metric tonne vs short ton
A metric tonne is 1,000 kilograms, about 2,204.6 pounds, and is standard in metals and many international markets. A short ton, common in US agricultural and fertilizer markets, is 2,000 pounds.
- Troy ounce
The troy ounce, about 31.1 grams, is the standard unit for precious metals such as gold, silver, platinum and palladium.
- Bushel
A bushel is a US unit for grains and oilseeds, defined for trading by weight for each crop: for example 56 pounds for corn and 60 pounds for wheat and soybeans.
9 terms
Credits, allowances and certificates
Credits, allowances and certificates traded alongside energy and other commodities.
- Carbon allowance
A carbon allowance is a tradable permit, issued under a cap-and-trade program, to emit one ton of carbon dioxide or its equivalent (CO2e). Covered emitters surrender allowances to match their emissions, and the cap limits how many allowances are issued.
- Carbon offset
A carbon offset is a credit representing one metric ton of CO2e reduced or removed from the atmosphere by a project, such as forestry or methane capture. Compliance offsets are issued under a regulated program, and voluntary offsets are issued by independent registries under their own standards.
- REC (renewable energy certificate)
A renewable energy certificate (REC) represents the environmental and other non-power attributes of one megawatt-hour (MWh) of renewable electricity generated and delivered to the grid. RECs are tracked by ID and can be sold separately from the power, for example to meet state renewable portfolio standards or voluntary goals.
- RIN (Renewable Identification Number)
A Renewable Identification Number (RIN) is the credit used to show compliance with the US EPA's Renewable Fuel Standard (RFS). One RIN represents an ethanol-equivalent gallon of renewable fuel used for transportation in the US, and once separated from the fuel it can be traded on its own.
- D-codes (D3, D4, D5 and D6)
A RIN's D-code shows which RFS category the fuel qualifies for: D3 is cellulosic biofuel, D4 biomass-based diesel, D5 advanced biofuel and D6 renewable fuel, mostly ethanol. A D7 code covers cellulosic diesel, and prices often differ by D-code.
- RVO (Renewable Volume Obligation)
A Renewable Volume Obligation (RVO) is the amount of renewable fuel an obligated party, a refiner or importer of gasoline or diesel, must account for each year under the RFS by retiring RINs. It's calculated for four categories (cellulosic biofuel, biomass-based diesel, advanced biofuel and total renewable fuel) from EPA's annual percentage standards and the party's gasoline and diesel volume.
- EMTS (EPA Moderated Transaction System)
EMTS is the EPA's system of record for RINs and other fuel-program credits, where companies generate, separate, transfer and retire RINs. For a RIN trade, the buyer and the seller each submit their side and EMTS matches them before moving the RINs between accounts.
- LCFS credit
Under California's Low Carbon Fuel Standard (LCFS), run by the California Air Resources Board (CARB), fuels with a carbon intensity below the annual benchmark generate credits and fuels above it generate deficits. Each credit or deficit is one metric ton of CO2e, and parties with deficits must hold enough credits to cover them. Oregon and Washington run similar low-carbon fuel programs.
- Carbon intensity (CI)
Carbon intensity (CI) is a fuel's life-cycle greenhouse gas emissions per unit of energy, measured in grams of CO2 equivalent per megajoule (gCO2e/MJ). Under the LCFS, each fuel pathway's CI is compared with a benchmark that declines over time.
4 terms
Regulation and records
Rules, regulators and reports that shape how trade records are kept.
- Audit trail
An audit trail is a timestamped record of who created or changed a record and when. Compliance teams, auditors and regulators use it to reconstruct what happened.
In APACT: Every booking, amendment, invoice, report and login is logged with the user and the time.
- CFTC Regulation 1.31
CFTC Regulation 1.31 (17 CFR 1.31) sets how firms required by the Commodity Exchange Act or CFTC rules keep their regulatory records. Most records must be kept for at least five years (swap records for the life of the swap plus five years), electronic records must stay readily accessible for the whole period, and records must be produced to the CFTC on request.
- NFA (National Futures Association)
The National Futures Association (NFA) is the industry-wide self-regulatory organization for the US derivatives industry, designated by the CFTC as a registered futures association. Firms registered with the CFTC in roles such as futures commission merchant or introducing broker are generally required to be NFA members and follow its rules.
- SOC 2
A SOC 2 report is an independent CPA firm's examination of a service provider's controls against the AICPA's Trust Services Criteria: security, availability, processing integrity, confidentiality and privacy. A Type I report covers how controls are designed at a point in time, and a Type II report also tests whether they worked over a period, often 6 to 12 months.
Definitions are general summaries, not legal or regulatory advice. Usage varies by firm and market, and rules change, so check the current rule text and your compliance team before relying on a definition.
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