Introduction
Hello Solomon Exam Prep Series 3 student!
The Commodity Exchange Act requires individuals and entities that do business as futures professionals to register with the Commodity Futures Trading Commission (CFTC), the government agency that regulates the futures and options industry, and become a member of the National Futures Association (NFA), the industry self-regulatory organization.
If you work as a sole proprietor or as an associated person at one of the following, you may need to take the Series 3 exam:
• Futures commission merchant (FCM)—a brokerage firm that solicits orders from customers and executes trades. It may also provide credit to its customers to enable trading.
• Introducing broker (IB)—a brokerage firm that solicits orders from customers but is not permitted to execute them. It must send its orders to an FCM to execute and clear the trades.
• Commodity trading advisor (CTA)—an individual or firm that analyzes futures markets, issues reports, offers advice, and makes recommendations.
• Commodity pool operator (CPO)—an individual or firm that solicits funds from the public and pools them into a single account to invest in futures contracts.
• Retail foreign exchange dealer (RFED)—an individual or entity that acts as a counterparty to an over-the-counter foreign currency transaction.
What does a Series 3 qualify an individual to do?
The Series 3 qualifies individuals to sell commodities, futures contracts, or commodity pools. The term “selling” includes soliciting orders, customers, customer funds, or customer accounts on behalf of FCMs, IBs, CTAs, or CPOs. It also qualifies those who work for a CTA to analyze, issue reports, and offer advice on futures markets. Finally, it qualifies individuals to manage other individuals who sell commodities or futures contracts.
Under certain circumstances, the Series 3 can be substituted through alternative exams.
What subjects doe