why some firms require series 7 and some don't?

Discussion in 'Prop Firms' started by di1836, Aug 7, 2010.

  1. di1836


    why is it that some firms require traders to have a series 7 and some don't? what are the differences between these firms?
  2. Good question.... and well overdue.
  3. JeffUSA


    You should only need a series 7 when you are trying to sell stock to the public (i.e. you want to be a stock broker as a career). It makes absolutely no sense to me for a trader to need a series 7 license.
  4. Some broker dealer firms that do proprietary trading are regulated by the CBOE (which doesn't have the Series 7 requirement). Many firms, however, are regulated by other self-regulatory organizations that do require the Series 7.
  5. di1836


    this explains why some Brokers may need a Series 7 vs others, but not why some prop traders do and some don't , since prop traders arent transacting with their clients' money but their firm/bosses'.
  6. It explains why some prop firms may require a Series 7 from all their prop traders vs. none of them. The Series 7 requirement never made much sense to me in the basic prop trader context and seems like the result of rules that got over-inclusive.

    On the other hand, some traders consider having a Series 7 as an advantage for doing more in the industry later on, so they primarily seek out prop firms that will sponsor them to get the Series 7.
  7. No it actually DOES explain why some prop firms require S7 and why some do not.
  8. dealmaker


    "why is it that some firms require traders to have a series 7 and some don't? what are the differences between these firms?" di1836

    Firms require series 7 because you are a sub B account trader ( i.e. no SIPC) and rather than a client you are a partner ( only on paper) and your deposit is used as risk capital ( i.e. you are trading the firms money) and for taxes you file K1.
    In others you file 1099 and you are a client i.e. SIPC.
    The major difference for the trader is larger leverage. Leverage is different than margin. In margin accounts if you lose the margin you owe the money, in leverage you don't owe a thing unless you broke the trading agreement you signed with the firm eg. can't trade stock over $100 etc..
  9. The only reason a prop firm would require a 7 is for RISK CONTROL.

    When I traded with Schonfeld Securities, 99-2004 the just started to require a 7 for all new traders. They were fined for a minor fraction before that. Hence, having all prop traders with the 7, the buck stops with that trader if they do any 'Rules" breaking. The firm is off the hook, so to speak for the most part.

    I raise millions of dollars a month for venture projects, I was required to have the series 22 while at a Firm with a brokage end of things. However, now that I am an officer of the Capital Raising team (My own LLC and a Partnership with another Rain Maker), no lisc. is needed. We do not deal with any "Securities" as defined by Rule 144 Reg A for the most part and still only deal with sophisticated investors defined by Private Placement rules, to play it safe anyway.
  10. " why some firms require series 7 and some don't?"

    Could the answer be " to cover their butts with yours"?
    #10     Oct 27, 2010