What Is the Series 3?
Series 3 is an exam, moreover referred to as the National Commodities Futures Examination, administered through the Financial Industry Regulatory Authority (FINRA) on behalf of the National Futures Association (NFA). Candidates who pass the exam are eligible to sign up with the NFA and sell commodity futures contracts and options on commodity futures contracts. Series 3 is one of the numerous checks for funding experts administered with the aid ofFinancial Industry Regulatory Authority (FINRA), along with the Series 7 General Securities Representative Exam, that is required for marketers who desire to promote enterprise, government, or one-of-a-kind sorts of securities.

Key Factors

• Series 3 is an exam administered through the use of the Financial Industry Regulatory Authority (FINRA) on behalf of the National Futures Association (NFA), a self-regulatory organization for the U.S. Derivatives marketplace.
• Candidates who bypass the Series 3 examination can check in with the NFA to sell commodity futures contracts and options on commodity futures contracts.
• As a possibility to Series 3, there are numerous exclusive assessments people can take to become eligible to work in the commodities and futures markets.
• How the Series 3 Works
• The Series 3 examination covers topics that commodities brokers want to comprehend, which include alternatives, futures, hedging, and margin necessities, further to market and regulatory policies. The exam consists of a hundred and twenty a couple of-choice questions in parts, and applicants have hours and 1/2-hour to finish it. Unlike the Series 7 examination, candidates do now not need to be subsidized through a company to take the Series 3 examination.

Candidates should attain a rating of around 70% in each element to pass the examination. (There isn't any legitimate skip charge, but the significantly ordinary skip fee is spherical 70%.) Those who fail to skip may also take the examination yet again, although they may be troubled to a ready duration. The exam price is $130.

Important
Anyone who desires to promote commodity futures contracts ought to typically skip the Series 3 exam.
The NFA, a self-regulatory employer for the U.S. Derivatives market, requires anybody "who's using for NFA membership as a futures fee provider company (FCM), retail forex provider (RFED), introducing dealer (IB), commodity pool operator (CPO), or commodity trading advertising consultant (CTA), leverage transaction merchant (LTM) or as an associated person (AP) of these entities, to fulfill talent requirements."

In most cases, people searching for an NFA club or registration as an associated person must bypass the Series 3 exam years in advance than they practice. That's except:
The individual is presently registered as a floor dealer
The character surpassed Series Three more than years preceding the software program and, considering that that date has now not had a continuous registration gap for more than two years as an AP or FB or FCM, IB, CPO, CTA, or LTM who's a member of NFA.
To sign on for any Destiny organization checks, an applicant wants to observe online on the Financial Industry Regulatory Authority (FINRA) net web page. Typically, FINRA will notify right away the NFA that a man or woman has surpassed one of the futures industry tests. In a few instances, but, the NFA might also request that candidates provide proof that they surpassed.

Alternatives to the Series 3
Rather than Series 3, people can be eligible to take distinct checks and pursue different registration alternatives based mostly on their registration repute and the individual of the company they conduct. These include:

1. Futures Managed Funds Examination (Series 31)
2. Limited Futures Examination-Regulations (Series 32)
3. Other certification assessments related to Series 3 are Series 30 (NFA Branch Manager Examination) and Series 34 (Retail Off-Exchange the Forex market Examination).

Series 3 isn't always taken into consideration as a prerequisite or corequisite for any of those one-of-a-kind checks.

For greater records on the Series 3 and other Destiny enterprise checks, visit the NFA's Proficiency Requirements page. For extra information on taking the check, go to FINRA's On the Day of Your Qualification Exam resource page. 

Career paths in series 3:

1. Branch Manager:

To become a branch manager, an applicant must pass the Series 30 examination. The test consists of 50 questions that measure the understanding of a wide range of NFA and CFTC rules regarding marketing, regulatory issues, and customer requirements. Once completed, the person can oversee other APs while handling the day-to-day operations of their own commodities branch office.

2. Introducing Broker (IB):
If you are an entrepreneurial type, who is willing to strike out on your own and go beyond managing a branch, you can register with the NFA as an introducing broker. Becoming an IB does not require any additional licensing beyond passing the Series 3.
 As a branch manager, you will be able to oversee APs in your office, but unlike a branch manager, you assume all of the liability and the rewards of obtaining and working with clients directly.
If you plan to become an IB, you can set up your business in one of two ways

• Guaranteed IBs: The majority of APs making the transition from being simply a commodities broker to becoming a brokerage firm typically decide to become "guaranteed" by an FCM. By agreeing to be a guarantor, an FCM not only handles all of the customer funds and trading operations but also vouches for the IB, reducing the need for the IB to have any capital requirements while at the same time putting the IB into an exclusive relationship with the FCM that is guaranteeing it.
•  Independent IBs: The second way to set up an IB is to become independent. Independent IBs still rely on FCMs to handle their trading operations, but instead of having a captive relationship, the IB and their clients can have multiple relationships with as many FCMs as they choose.

Over the years, the NFA has instituted various capital requirements that an IB must maintain to have the privilege of being independent. The key benefit is that IBs can negotiate the best commission rates possible from the various FCMs because of the forced competition for the IBs' business. This can increase the IBs' profits while passing on better savings to their customers.

3. Managing Clients' Money:

There are also those people who take the Series 3 test who feel that they have a unique insight into how the markets work. They believe that they can manage their clients' money and would rather gain a percentage of the profits, instead of just earning a commission on the transactions. Those APs who want to go in this direction can apply to become Commodity Trading Advisors (CTA) or Commodity Pool Operators (CPOs) with the NFA. IBs can also register their firm or set up a company to handle these money management services the indivudal can register as:

Commodity Trading Advisors:

To obtain the CTA designation, an AP has to register with both the CFTC and the NFA. A CTA can register with the CFTC and not the NFA, but not the other way around. If an AP registers as a CTA only with the CFTC, that person is allowed to give general trading advice, put out newsletters, and make recommendations, but cannot handle clients' money. This is known in the business as being an "educational" CTA. If you wish to manage client funds actively, then you must register with NFA as a CTA, pay additional fees, and adhere to a strict set of rules and regulations.

Another strict rule is that CTAs must maintain segregated accounts for each client for whom they manage money. This requires that each account has orders independently executed and trades must be allocated to each client's account to properly attribute gains and losses.

 In this way, the CTA is much like the commodities equivalent of a registered investment advisor for an individual's stock and bond portfolio.

In exchange for all of this extra work, CTAs can collect a management fee and a performance fee. The management fee is typically 2% of all of the assets under management, and the performance fee can range from 20% to upwards of all of the new money raised.

 As CTAs build their business, there is no limit to the amount of capital that they can have under management, if they are good managers.

Commodity Pool Operators (CPO):

The CPO is another type of money management professional. CPOs can collect the same management and performance fees as CTAs, but instead of having to track each client individually, they can aggregate all of the capital under one account and allocate returns according to the percentage that each investor owns.

There are two types of CPOs: public and private. Public CPOs must jump through a lot of hoops with both the CFTC and the Securities and Exchange Commission (SEC) to be listed on any of the exchanges and raise money. Private CPOs can use SEC Regulation D, which governs private placements, to raise funds from accredited investors only.

An AP or an IB may end up creating enough of a client base over the years to fund their CTA or CPO operations without ever having to market or raise too much outside capital. For APs that have been in the business for years, this is simply one of many logical steps to increase their value in the eyes of their clients and to raise their status among their peers. As a CTA or a CPO, you can operate on par with an IB by hiring your APs to promote and market your services, paying them bonuses as they acquire clients.

Exams for Licensed Brokers

Series 3 is just one way to access the world of commodities for your clients. Stockbrokers who want to narrow their work to helping CTAs and CPOs raise capital can take the Series 31 exam, which has only 45 questions. Once completed, stockbrokers can introduce their clients to the alternative world of futures and commodities investing while still fulfilling their fiduciary responsibility.

Those stockbrokers or commodities brokers that are licensed in the United Kingdom can enter the United States structure of futures by simply taking the Series 32. Once the Series 32 is completed, those individuals can then be an IB, CTA, CPO, or FCM.

Final Thoughts 

Becoming a commodities or futures broker does not have to end with passing the Series 3. That is just a gateway to managing other brokers, setting up your brokerage firm, and/or managing client funds. This is a career where the sky is the limit. A commodities broker can transition from making a small percentage of the commission charged for every transaction to running their money management firm, which could generate millions in income for themselves and their clients.