What Is the Series 57
The Series 57 exam was previously known as the Series 55. It is administered by the Financial Industry Regulatory Authority (FINRA). The exam, called the Securities Trader Representative Exam, is required for individuals looking to be a securities trader representative. These individuals can trade equity and convertible debt securities.
To become a Securities Trader Representative individuals must pass the Series 57 and the Securities Industry Essentials (SIE). With the Series 57, individuals can partake in NASDAQ trading, OTC equity trading and proprietary trading.
Breaking Down Series 57
The Series 55 exam became the Series 57 exam in 2016 as a way to address high-frequency trading. The aim to help regulate high-frequency trading firms. The new rule forces broker-dealer firms to register with FINRA.
The Series 57 exam is meant to assess the competency of entry-level equity traders. Its intent is to protect the investing public by helping to ensure that equity traders possess the competency to perform their jobs. The Series 57 measures the “degree to which each candidate possesses the knowledge, skills and abilities needed to perform the critical functions of an equity trader," per FINRA.
The Series 57 exam's contents were developed based on an equity trader job analysis study, which included required knowledge, specific tasks and job functions. The study entailed data collection as well as surveys of a wide variety of firms. The change from Series 55 to 57 was meant to fold high-frequency traders into regulation.
Series 57 Eligibility Requirements
Candidate must be associated with and sponsored by a FINRA member firm to be eligible to take the Series 57 exam. The SIE exam is a corequisite, with candidates having to pass both exams to become registered as a securities trader.
Those who passed the Series 55 or Series 56 before the change to Series 57 (Jan. 2016) are grandfathered in and don’t have to take Series 57. Any person developing or designing an algorithmic trading strategy, or overseeing such activities, must pass the Series 57. Requiring Series 57 ensures someone at a firm can identify and register as having knowledge of and responsibility for the trading strategy and technology used.
Series 57 Exam Structure
The Series 57 exam consists of 50 multiple-choice questions. Candidates are allocated 105 minutes to complete it and correctly answer at least 70% of questions to pass.
Exam questions vary in degree of complexity and difficulty. Each question has only one best answer. They are frequently changed as regulations are amended and new products are introduced, so candidates should keep abreast of changes in applicable rules and regulations.
Each scored question is worth a single point. Since there is no penalty for guessing, Series 55 candidates should answer every question.
The questions cover the following content subjects:
- Trading Activities, covering 82% of the exam (41 questions)
- Maintaining Books and Records, Trade Reporting and Clearance and Settlement, covering 18% of the exam (9 questions)
Series 57 Test Day
The Series 57 exam is administered by computer. Candidates aren't allowed any reference material but are given scratch paper and basic electronic calculators (some of the exam's questions involve calculations). For more information, see FINRA's resource, On the Day of Your Qualification Examination.