Tuesday, August 23, 2011

Under Pressure

In the infinite wisdom of FINRA, the Financial Industry Regulatory Authority, a new license requirement was established for proprietary traders.  Listed as the new Series 56 Examination, proprietary traders have until September 19, 2011 to pass the exam in order to continue working in a trading situation. 

The new requirement has been met with more than just a bit of grumbling.  Traders are a unique lot.  Most are accustomed to operating daily under intense pressure  -  just not examination pressure.  Many accomplished and successful traders, who consistently perform well for clients of their so-called "prop desks," have not attended a class in years.  They learned their craft on-the-job.  The prospect of taking an examination, especially one that is administered on a computer, is intimidating.

To make matters worse FINRA was slow in publishing guidance on the content of the exam.  Thus far it appears the exam is largely composed of options related questions borrowed from the ubiquitous Series 7 Examination question pool.  The Chicago Board of Option Exchanges finally issued a guide for the content of the Series 56 exam.

Failing the exam on the first round is not a "deal killer" for traders.  There are second and third chances if necessary.  However, a trader could get "logged out" if her or she fails to pass the exam on the second try.  A six-month wait period is required after the second failed exam.  Do not be surprised if a new voice answers the trading desk phone on September 20th.  Your usual trader is likely "under pressure" to pass an exam.

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