What Is the Series 3
The Series 3 is a securities license entitling the holder to sell commodities futures contracts and options on commodities futures contracts. Passing the Series 3 test allows anyone in the U.S. the right to offer alternative investments in commodities and futures securities. Many people interested in becoming an investment professional in the United States choose between taking the Series 7, which certifies the trading or selling or securities, or the more difficult Series 3.
Breaking Down Series 3
The Series 3 exam is administered by the Financial Industry Regulatory Authority (FINRA) on behalf of the National Futures Association (NFA) and covers topics such as options, futures, hedging and margin requirements, as well as market and regulatory knowledge.
The exam consists of 120 scored questions in two parts. Candidates have two hours and 30 minutes to complete it. Candidates must achieve a score of at least 70% in each part to pass the exam. The exam costs $130.
Series 3 Proficiency Requirements
The NFA requires anyone "who is applying for NFA membership as a futures commission merchant (FCM), retail foreign exchange dealer (RFED), introducing broker (IB), commodity pool operator (CPO), or commodity trading advisor (CTA), leverage transaction merchant (LTM) or as an associated person (AP) of these entities, to satisfy proficiency requirements."
In the majority of cases, any person seeking NFA membership or registration as an associated person must pass the National Commodity Futures Examination (NCFE or Series 3) within two years preceding their application in order to fulfill this requirement, unless:
- The individual is currently registered as a floor broker; or
- The individual passed the Series 3 more than two years preceding the application and since that date has not had a continuous registration gap for more than two years as an AP or FB or FCM, IB, CPO, CTA or LTM that is a Member of NFA.
To sign up for any futures industry exams, an applicant must apply online by visiting FINRA's website. Typically, FINRA will notify directly the NFA that an individual has passed one of the futures industry exams. In some circumstances, however, the NFA may request that the candidate provide proof that he or she passed an exam.
For more on the Series 3 exam, including what it contains, visit the NFA's Proficiency Exam page. And for resources about what to expect on exam day, visit FINRA's On the Day of Your Qualification Exam resource page.
Series 3 Alternatives
Rather than the Series 3, individuals may be eligible to pursue other licensing options based on an individual's registration status and the business they conduct. They include:
- Futures Managed Funds Examination (Series 31)
- Limited Futures Examination-Regulations (Series 32)
Other certification exams related to the Series 3 are the Series 30 (NFA Branch Manager Examination) and Series 34 (Retail Off-Exchange Forex Examination). An individual who is a Branch Office Manager and an Associated Person are required to pass the Series 30 within two years preceding their application. The Series 34 allows individuals to engage in off-exchange retail forex.