Question about FINRA regulations.

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Question about FINRA regulations.

posted Jul 18, 2017

How does Quantopian deal with:
"The SEC approved an amendment to NASD Rule 1032(f) that expands the scope of persons required to register as a Securities Trader.1 Specifically, beginning January 30, 2017, each associated person who is primarily responsible for the design, development or significant modification of an algorithmic trading strategy relating to equity, preferred or convertible debt securities, or who is responsible for the day-to-day supervision or direction of such activities, must pass the Series 57 exam and register as a Securities Trader. The rule text is available in the online FINRA Manual."

https://www.finra.org/sites/default/files/Regulatory-Notice-16-21.pdf

2 responses

IIRC this rule only applies to brokers and their employees. Don't think it covers retail traders who send their orders to a broker like Robinhood or IB since the broker is making the actual trades.

Thanks for poking the topic. I re-read it after reading the response and noticed this part:
"Similarly, an algorithm that solely generates trading ideas or investment allocations, including an automated investment service that constructs portfolio recommendations,
but that is not equipped to automatically generate orders or order-related messages to
effectuate such trading ideas into the market (whether independently or via a linked
router), would not constitute an algorithmic trading strategy under the rule. However,
if an order router or investment algorithm performs additional functions that include
the generation or routing of orders or order-related messages, such system would be
considered an “algorithmic trading strategy.”"

-- So, I'm not really clear on whether asking the broker to open or close a trade constitutes
a doing as opposed to a recommending.

To be sure, Q could game it in house to say "their algo generates recommendations. we just
honor them" and have someone on staff with the credential. I'm not sure how valid the
"it's not an order until it gets to a broker" logic is.

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.