(DEADLINE AUGUST 12, 2011)
With last Thursday’s pronouncement from the CBOE that all Proprietary Traders will now have to pass the Series 56 (The Traders Qualification Examination) by August 12th 2011, Traders are scrambling to figure out what exactly this exam will entail.
Here is a brief overview of some basics about the Series 56 Exam*:
Introduction
The Proprietary Traders Qualification Examination (Series 56) is designed to test a candidate’s knowledge of applicable products, securities markets, trading and reporting practices, investment strategies, and anti-fraud provisions as applicable to the role of a proprietary trader.
Structure of the Examination
The examination is composed of 100 multiple-choice questions covering the materials in the following outline in accordance with the subject-matter distribution listed. Candidates will be allowed 2 1/2 hours to complete the examination. At the completion of the examination, each candidate will receive an informational breakdown of their performance on each section and their overall score. The examination is a closed-book test and candidates will not be permitted to use any reference material during their testing session. Scratch paper and a basic electronic calculator will be provided by the test center administrator. Severe penalties are imposed on candidates who cheat on securities industry qualification examinations.
To ensure that new questions meet acceptable testing standards prior to use, each examination includes 5 additional, unidentified “pre-test” questions that do not contribute towards the candidate’s score. The 5 questions are randomly distributed throughout the examination. Therefore, each candidate takes a total of 105 questions, of which 100 questions are scored.
Proprietary traders and market makers will soon be taking the new Series 56 Examination, unlike the Series 7 exam; this new exam will focus on trading-specific topics.
For those traders that have Series 7s it may be possible to fill out a Waiver form to circumvent the Series 56.
Series 56 v. Series 7, And the Likelihood of Waivers
Traders typically must take the Series 7 exam and/or an Exchange house exam – e.g., Nasdaq’s Series 55 exam, NYSE Amex’s Series 48 exam, NYSE Arca’s Series 44 exam. Most house exams will likely be superseded, though some exchanges may administer it to new traders. The Series 7 exam, which is geared primarily to retail stock brokers, is lengthy and covers an array of brokerage topics – most are irrelevant to the world of trading.
Traders and market makers, who currently are required to hold the Series 7 License, are hoping they can waive the Series 56 exam. Though the issue has not been settled officials at the CBOE say a waiver for the Series 7 is a good possibility. The waiver likely would not apply to new traders, however.
It’s also not clear whether regulators will make any distinction between market makers and prop traders. After all, the Series 56 exam is also known as the Proprietary Traders Exam.
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