Series 57

The Series 57 — also known as the Securities Trader Qualification Examination (STQE) — is a securities license and exam required for individuals who wish to engage in trading in the U.S. securities markets. It is administered by the Financial Industry Regulatory Authority (FINRA). The exam is designed to assess a candidate’s knowledge and competence in the field of securities trading. This guide will delve into the specifics of the Series 57 license, the content and structure of the examination, the eligibility criteria, and the significance of the license in financial markets.

What is Series 57?

Series 57 is a license that primarily pertains to equity traders and proprietary traders. It allows individuals to trade equity and convertible debt securities in the secondary market. It’s essential for those working for broker-dealers, proprietary trading firms, and other financial institutions where managing and executing trades is a core function.

Holding a Series 57 license is a regulatory requirement as it ensures that traders have the necessary knowledge of market regulations, trading strategies, risk management practices, and compliance standards. This license replaced the now-defunct Series 55 license after a regulatory overhaul aimed at modernizing and consolidating various FINRA exams.

Exam Content and Structure

The Series 57 exam consists of 50 multiple-choice questions that cover a broad range of topics related to securities trading. Candidates are given 105 minutes to complete the test. The exam includes questions on various subjects, including but not limited to:

Each question tests the candidate’s ability to apply the rules and practices in realistic scenarios that they might encounter in their trading practice.

Eligibility Criteria

To be eligible to sit for the Series 57 exam, a candidate must be associated with and sponsored by a FINRA-member firm or another regulatory authority’s firm. This sponsorship requirement means that candidates already need to be employed in the industry and be preparing for or expanding their roles within their firm.

Furthermore, candidates are required to pass the Securities Industry Essentials (SIE) exam either before or along with the Series 57 exam. The SIE exam tests fundamental securities industry knowledge and serves as a stepping stone to more specialized FINRA exams like the Series 57.

The Significance of the Series 57 License

Compliance and Regulation

Holding a Series 57 license signifies that the trader has met the necessary regulatory standards required for trading securities. Regulatory compliance is a significant focus in today’s financial markets, and the Series 57 ensures the trader is well-versed in the rules and practices required to trade securities lawfully and ethically.

Knowledge and Expertise

Achieving the Series 57 certification demonstrates a comprehensive understanding of market mechanics, trading strategies, and regulatory requirements. This is critical not only for ensuring effective and compliant trading operations but also for maintaining the integrity and stability of financial markets.

Career Advancement

For professionals in the trading industry, obtaining the Series 57 license can be crucial for career advancement. Many firms require this certification for roles involving direct interaction with securities trading. Holding this license can open doors to higher-level positions and can be a valuable credential in a competitive job market.

Financial Markets Context

Trading in today’s financial markets involves complex strategies, high-frequency trading, algorithmic trading, and a thorough understanding of market microstructure. The Series 57 ensures that professionals are equipped to handle these complex aspects efficiently and ethically, thus contributing to the robustness and integrity of financial markets.

The Examination Process

Registration and Application

To take the Series 57 exam, candidates must be registered with the FINRA-member firm which sponsors their application. The registration can be completed using the Form U4 (Uniform Application for Securities Industry Registration or Transfer). Once registered, candidates can schedule their examination through the Prometric website, which administers the test on behalf of FINRA.

Fees

The fee for the Series 57 exam is $135. This fee is non-refundable and is required to be paid at the time of registration.

Study and Preparation

Successful completion of the Series 57 exam typically requires dedicated study and preparation. There are various resources available, including textbooks, online courses, and practice exams. Many candidates find that participating in study groups or enrolling in review courses can be particularly beneficial. The key areas to focus on during preparation include understanding the intricacies of trading regulations, different order types, risk management practices, and market mechanics.

Test Day

On the day of the exam, candidates are required to bring valid identification and adhere to testing center rules. The exam is taken on a computer and results are provided immediately upon completion. A passing score is 70%, which means correctly answering at least 35 out of the 50 questions.

Retaking the Exam

If a candidate does not pass the Series 57 exam on their first attempt, they must wait 30 days before taking it again. After a third failed attempt, a waiting period of 180 days is imposed before the candidate can retake the exam.

Continuing Education and Maintaining the License

Once a candidate has passed the Series 57 exam and obtained their license, maintaining the license involves ongoing regulatory education. FINRA requires registered representatives to complete a continuing education program, comprising both firm-element and regulatory-element training.

Firm-Element Training

Firm-element training is designed and administered by the employing firm and includes annual training programs that address product-specific knowledge, compliance issues, and other pertinent topics relevant to the trader’s role and responsibilities.

Regulatory-Element Training

The regulatory-element training is mandated by FINRA and must be completed within 120 days of a registered representative’s second anniversary date of obtaining their license, and every three years thereafter. This training module typically includes a review of current regulatory updates, compliance mandates, and market trends.

Conclusion

The Series 57 license is a critical qualification for anyone involved in securities trading in the United States. It ensures that traders have a firm understanding of the regulatory landscape, trading practices, and market structures. Obtaining this license not only enhances a trader’s competence and compliance but also plays a significant role in career progression within the financial industry.

For more detailed information on the Series 57 exam, you can visit the FINRA website.