Forex Broker License

The process of getting a broker license in the United States is long and complicated because it includes several steps that have to be followed and some paperwork that needs to be filled in. The reason why the license process in the United States was chosen was because the trading that the group did was in this country, but it has to be kept in mind that some of
these rules and conditions may not apply in other countries where there could be some additional rules that are applied. The normal application process for a broker license has to be done through the U.S. Commodity Futures Trading Commission (CFTC) and the U.S. Security and Exchange Commission (SEC). The application requires some information from the applicant like bank account where all the clients’ funds are going to be collected, “dealing manuals & agreements, anti-money laundering policies, conflict of interest policies”. As the process continues there will be some background investigation and also some examinations of security principles and state laws that the applicant needs to pass in forward to get this license.

Series 3 License

Series 3 License is “a securities license entitling the holder to sell commodities or futures contracts”120. There is an exam that gives the certification of the Series 3, so there are some concepts that this test covers. The Series 3 examination is required by the National Futures Association (NFA) and the Commodities Futures Trading Commission (CFTC) to be a certified broker. It has to be clarified that the Series 3 license applies to commodities and futures trading. The Series 3 examination is made of two parts: market knowledge and regulatory knowledge121. The minimum percentage needed to pass this test is 70%. Some of the main topics covered in this test are:

  • Futures Trading Theory
  • Margins, Limits, Settlements
  • Orders, Accounts, Analysis
  • Basic Hedging
  • Financial Hedging
  • Spreads
  • General Speculation
  • Financial Speculation
  • Options
  • Regulations

Series 34 License

The definition of the Series 34 License is “an exam required for individuals seeking to engage in off-exchange forex transactions with retail customers”. This means that this license is the one that forex professional trades are interested in. Similarly to the Series 3 license, this license covers different topics that will guaranty that the individual is capable of doing forex trading business. The main topics this exam covers are:

  • Definitions and Terminology
  • Forex Trading Calculations
  • Risks Associated with Forex Trading
  • Forex Market – Concepts, Theories, Economic Factors and Indicators, Participants
  • Forex Regulatory Requirements

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