Most people constantly hear about the big US tech companies: Apple, NVIDIA, Amazon, Alphabet, Meta and the rest.

But few people ever really think about the commodity trading companies that make such mind-blowing leaps in technology possible. Data centres need energy; semiconductors need metal; iPhones need oil.

So without the likes of Vitol, Trafigura and Glencore, none of the momentous leaps we are making today would even be possible. There would be no AI, no cloud infrastructure.

Yet these companies are still not household names. So why does the wider public know almost nothing about an industry that impacts our daily lives? A multi trillion-dollar industry that practically no one can be bothered to write about?

Here are the top five real reasons why commodity trading is secretive:

1) Traders Fear Transparency

Commodity traders thrive in environments where they have a competitive edge, which is essential for their profitability. Two words traders fear even more than “net loss” are “transparency” and “efficiency”.

Why? Because these traders rely on market opacity to make informed, lucrative decisions.

In a market that’s too transparent and efficient, there’s little room for the strategic maneuvering that allows them to capitalise on imperfect information. Understanding who knows what when is key to being a good trader.

The reason traders can demand such high salaries and bonuses is due to the years they’ve invested in honing their skills and knowledge in their specific domains. They’ve become technical experts, building a protective moat around their careers.

This expertise not only ensures their value in the market but also provides a level of job security. You won’t see hundreds of physical commodity traders hauling cardboard boxes out of their offices any time soon!

2) Commodity Trading’s Exclusive Network

The only people welcomed over the moat are family and friends. The rest of us must take the tough route in. When new applicants come to the commodity industry, it can be a disadvantage if they don’t already know someone.

A unique advantage for a new entrant is if they understand the jargon and fundamentals of commodity trading. The lingo shows that you know more than people might expect and that you in fact do belong inside this exclusive network.

From a technical point of view, most commodity futures are voice brokered. So just to find out the prices of a commodity you want to trade, you need to know broking companies and develop human relationships.

These brokers can often be the family and friends of the same traders who want to keep everyone else outside.

Commodity traders do show a preference for one group of outsiders though: their international partners involved in the physical exchange of goods.

These counterparties, primarily suppliers and receivers in various countries, often work for state owned companies.

The transactions with these global counterparts are conducted discreetly, away from public scrutiny, making these relationships valued and unique within the trading community.

3) High Stakes, High Barriers

Margin requirements for futures can be high, especially during times of volatility. Physical trade finance requirements can be astronomical with a single cargo being worth hundreds of millions of dollars, depending on the commodity.

To add to this, regulation governing futures can be stringent whilst the lack of regulation for physical cargoes means the average person has zero visibility on physical fundamentals.

There aren’t exactly physical exchanges people can look up to see what is available and what prices are trading.

As a result, small amateur investors are kept out of the commodities market by a combination of regulation and capital-intensive requirements. If you cannot even get a seat at the table, then how can you see what is happening?

4) Silence is Golden

While some commodity traders might be inclined to share insights about their work, they are often legally restricted from doing so. The level of secrecy enforced by these legal barriers can sometimes feel like working for the CIA or MI6.

This limitation is primarily due to two types of legal agreements that every trader and trading company will sign:

a. Non-Disclosure Agreements (NDAs): These are contracts that employees and directors sign, agreeing not to disclose any confidential information about their work or the activities of their companies. NDAs are commonplace in this industry and serve as a stringent guard against the sharing of trade secrets and operational details.

b. Restrictive Covenants: These are clauses in contracts that further limit employees’ ability to share information, both during and after their employment. They can include non-compete clauses and other restrictions that extend beyond the term of employment.

In commodity trading, it borders on Orwellian thought police. Almost every idea, strategy, or concept is considered intellectual property (IP) belonging to the company.

Employees then risk facing legal consequences if they disclose too much information. This environment of confidentiality significantly contributes to the secretive nature of the commodity trading industry.

5) Perhaps Most Traders Don’t Know Enough

One of the most intriguing reasons for the secrecy surrounding commodity trading is very simple: a lot of traders don’t fully understand their own industry!

One reason for this is because commodity markets are dynamic and constantly evolving. Such fluidity means the information and strategies that traders rely on can become outdated very quickly. Even contacts change on a regular basis.

As a result, traders can be hesitant to share their insights or explain their work. What is the point in explaining a concept or strategy that could be out of date the moment they open their mouths?

Many traders also concentrate on a very specific segment of the market, known as a “niche within a niche.”

For example, a trader who has spent their entire career specialising in gasoline derivatives in Asia might not be knowledgeable about other areas like chartering in drybulk vessels.

This high level of specialisation limits their ability to speak about the broader industry.

Riding off into the Sunset

Often, the most successful and experienced traders prefer to maintain a low profile. After achieving financial success, they stroll off into the sunset to enjoy their cash. So no one will be learning anything from these former professionals.