NCFE Series 3 Study Guide review

What is the Series 3 Exam?

The Series 3 exam, administered by FINRA (Financial Industry Regulatory Authority) also called the National Commodities Futures Exam (NCFE) is required by the National Futures Association (NFA) for people who intend to become members.

All companies or people intending to work as futures professionals must register under the Commodity Exchange Act , the purpose of which is to screen and ensure the fitness of each applicant to engage as a futures trader.

Series 3 Quick Facts

Exam NameSeries 3
Sponsorship Required?Yes - through membership of the NFA as member or associate in order to conduct futures-related business
Exam TypeCombination of True / False and Multiple Choice
Number of Questions120 in two parts.
Exam Duration150 minutes
Pass Mark70% (84 correct answers)
Cost$125.00
Pre-Requisite Exam?No
Administered byFINRA Series 3 Exam

Some applicants may be entitled to an exemption.  Click the relevant link to go to the NFA website to see if you gain exemption.

FCM – Futures Commission Merchant

SD – Swap Dealer

MSP – Major Swap Participant

RFED – Retail Foreign Exchange Dealer

IB – Introducing Broker

CPO – Commodity Pool Operator

CTA – Commodity Trading Advisor

AP – Associated Person

Principal

FB – Floor Broker

FT – Floor Trader

Series 3 Exam Questions

The FINRA Series 3 exam is composed of 120 questions, split into two parts.

There are 85 questions based on market knowledge and 35 questions testing your knowledge of the regulations.

There are also 5 pre-test questions that are mixed in (taking the total to 125 questions to answer on the day) but these 5 do not count to your score. These questions are being trailed before use in an actual examination.

Part I:

Futures Trading Theory and Basic Functions Terminology

General Theory

The Futures Contract

The Structure of Futures Markets

Hedging Theory

Speculative Theory

General Futures Terminology

General Options Terminology

Futures Margins, Option Premiums, Price Limits, Futures Settlements, Delivery, Exercise and Assignment

Margin Requirements

Option Premiums

Price Limits

Offsetting Contracts, Settlements, Delivery

Options Exercise, Assignment, Settlement

TYPES OF ORDERS, CUSTOMER ACCOUNTS, PRICE ANALYSIS

Basic Characteristics and Uses

Additional Orders

Technical Price Analysis

Fundamental Price Analysis

Interest Rate Analysis

BASIC HEDGING, BASIS CALCULATIONS, HEDGING FUTURES

Short Hedging and Long Hedging

The Basis

Hedging Calculations

SPREADING

Spread Trading

Common Types of Spreads

SPECULATING IN FUTURES

Profit/loss calculations for speculative trades (including spreads)

Trading Applications

OPTION HEDGING, SPECULATING, SPREADING

Option Theory

Option Hedge Strategies/Calculations

Option Speculative Strategies/Calculations

Option Spread Strategies/Calculations

Series 3 Exam – Part 2

Regulations

General

FCM/IB Regulations

CPO/CTA

Arbitration Procedures

NFA Disciplinary Procedures

CFTC Commodity Exchange Act Enforcement

A good source of further breakdown of information as to which questions will be covered can be found here.  There are also a selection of Series 3 exam practice questions and sample questions.

Recommended NCFE Series 3 Exam Study Guide:

NCFE Series 3 Study Guides

NCFE Flashcards


Be Sociable, Share!

Leave a Reply