The Series 3, also known as the National Commodities Futures Examination, is a licensing exam for financial professionals who wish to sell commodity futures contracts. The Series 3 allows a financial professional to sell both commodity futures contracts and options on commodity futures contracts. Those who take the Series 3 could also be stockbrokers, but they’d have to take another exam. Learn more about the Series 3, the people who administer it, and to how to best prepare for the exam.
Series 3: The Basics
The Series 3 allows a financial professional to sell both commodity futures contracts and options on commodity futures contracts. A commodity futures contract is an agreement to buy or sell a previously agreed-upon amount of a commodity for a set price on a specific date. Options on a commodity futures contract give a buyer the right (not obligation) to buy or sell a futures contract for a set price before the option expires.
The exam is administered by the Financial Industry Regulatory Authority (FINRA). That government non-for-profit organization that deals with the oversight of broker-dealers in the United States. The Series 3 was created by the National Futures Association (NFA), a self-regulatory organization for the U.S. derivatives industry.
There are 120 multiple-choice questions on the two-part exam and candidates must score 70% or higher to pass the exam. However, the Series 3 rounds any percentage points down to the next whole number. As a result, you can’t score 69.6% and pass the exam since that score will be rounded down to 69%.
Series 3 Requirements
Unlike several other licensing exams, candidates don’t need a sponsor to take the Series 3. Simply apply to take the Series 3 via the FINRA website. After that, you’ll fill out the required paperwork. Subsequently, you’ll receive notice from FINRA with your designated testing window. Finally, candidates will need to pay a $130 exam fee.
Once you pass the Series 3, you have two years to register with the NFA.
Preparing for the Series 3
To prepare for the Series 3, you’ll need to familiarize yourself with the topics covered on the exam. These topics include the basics of the futures and options market, hedging, speculating, margin requirements, types of orders, spreading, and market regulations.
Experts recommend studying between 60 and 80 hours for the Series 3 exam. Preparation methods should be a combination of practice tests, written materials, and in-person instruction. Those with experience trading futures and options will find the exam to be less difficult. However, such experience is not a prerequisite to taking the exam.
If you fail the Series 3, there is a 30-day waiting period before you can take it again. If you fail the Series 3 three times, then you will be subject to a 180-day waiting period every time you take the after thereafter. Candidates who fail after that 180-day waiting period may want to take a second look at commodities futures trading and reconsider if it’s the right profession for them.
What a Series 3 License Means
A Series 3 designation allows a financial professional to sell both commodity futures contracts and options on commodity futures contracts. Candidates who pass the exam are then able to register with the NFA within two years of passing the exam.
The Series 3 is a common designation for commodities and future professionals. Those who take the Series 3 could also be stockbrokers, though they will also need to take and pass the Series 7 exam.
Depending on the career path of a financial professional, there are several alternatives to the Series 3, including the Series 31 (managed futures) and Series 32 (limited futures).
The Bottom Line
The Series 3 is the FINRA exam that licenses financial professionals to sell commodity futures contracts and options and commodity futures contracts. Those who pass the exam could also go on to careers as stockbrokers, but they would have to take other exams.
With more than 80 hours of preparation and 120 multiple choice questions, the Series 3 can be daunting. Candidates must earn a score of 70% to pass the Series 3, though the exam’s scoring method rounds any percentage points down to the next whole number. Candidates who pass are set for careers in commodities. But those who fail more than three times have to wait nearly half a year to retake it.
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