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Question about FINRA regulations.
Andrew King
posted

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
Eric Novinson

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.

Andrew King

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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