Interesting in that they want source code. Seems like best thing to do is only code the essentials but leave the rest discretionary.
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FINRA Now Requires Programmers to Register as Securities Traders
- Thread starter InfoTech
- Start date
Are you an associated person of a member firm? If not this doesn't apply to you. If you're a retail trader it clearly doesn't apply if you read the linked document.WTF? This makes scores of software developers (including myself) operating illegally, unless we register as securities traders?
Associated person? What exactly does that mean?
I think what hes saying is that if youre actively taking part in developing the algorithm then you are an associated person. Then again, according to the document published, they only require the lead developer and/or trader to become a registered securities trader.
Hope that helped.
I think I've got it. Computer programmers are changing jobs all the time. They might develop a trading algorithm today and a website tomorrow. Many programmers don't necessarily directly profit from the algorithm. The way I see it, only those programmers are required to register who directly profit from the developed trading system.I think what hes saying is that if youre actively taking part in developing the algorithm then you are an associated person. Then again, according to the document published, they only require the lead developer and/or trader to become a registered securities trader.
Hope that helped.
I think I've got it. Computer programmers are changing jobs all the time. They might develop a trading algorithm today and a website tomorrow. Many programmers don't necessarily directly profit from the algorithm. The way I see it, only those programmers are required to register who directly profit from the developed trading system.
It was only a matter of time before the SEC started to regulate quants. In some ways it does make sense though. If you are creating an algorithm for the capital markets you should have some kind of credentials related to the industry. Its debatable though...
http://www.finra.org/sites/default/files/Regulatory-Notice-16-21.pdf
"An associated person who is (i) primarily responsible for the design, development or significant modification of an algorithmic trading strategy relating to equity, preferred or convertible debt securities; or (ii) responsible for the day-to-day supervision or direction of such activities, may register voluntarily as a Securities Trader beginning on the date of this Notice and must be registered as a Securities Trader beginning on January 30, 2017."
Thanks for the post. So the meaning is, if the orders are passthrough (broker) they are not subject to the rules, however any primary developer/architect and any service running/generating the orders would 'in most cases' be covered as they provide 'value-add'.
This is the key part "firms should keep in mind that, in adopting this requirement, FINRA’s goal is to ensure that firms identify and register one or more associated persons who possess knowledge of, and responsibility for, both the design of the intended trading strategy (e.g., the arbitrage strategy) and the technological implementation of such strategy (e.g., coding), sufficient to evaluate whether the resultant product is designed not only to achieve business objectives, but also regulatory compliance." - which implies for retail both the developer and the quant provider each need registration.
I especially like this "an order generation, routing and execution program used for large-sized orders that involve dividing the order into smaller-sized orders less likely to result in market impact" - the regulatory version of 'special order types', very good.
It's fascinating to see how everyone reads in to the rules, the whole wording is obtuse to make sure it covers the normal distribution but also, as they see fit, covers in hindsight extreme cases where someone finds a workaround. The best you can get to is, probably not or probably need to register, but that's the funny part about the financial markets, the rules are not there to stop you losing money, they're there to stop you making too much.
No one will understand what the reality is just yet, it means the level of perfection required at retail just went up unless your strategies hit the sweet spot in a one and done approach. You will need to work harder for the same, it skews away from retail seeking income without time towards those with capital and time. Just as well our strategies and tech were designed upfront for that methodology.
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A member firm is defined as "Member Firm – A member firm is a brokerage firm that has been admitted to membership in FINRA, whether or not the membership has been terminated or cancelled. A brokerage firm may be a partnership, corporation or other legal entity." https://www.finra.org/arbitration-and-mediation/dispute-resolution-glossary A list of member firms can be found at https://www.finra.org/about/firms-we-regulate If you don't work for one of these companies, you're not an associated person of a member firm.Associated person? What exactly does that mean?
Additionally the "Exchange Act definition of "associated person" of a broker-dealer: Section 3(a)(18)The term "person associated with a broker or dealer" or "associated person of a broker or dealer" means any partner, officer, director, or branch manager of such broker or dealer (or any person occupying a similar status or performing similar functions), any person directly or indirectly controlling, controlled by, or under common control with such broker or dealer, or any employee of such broker or dealer, except that any person associated with a broker or dealer whose functions are solely clerical or ministerial shall not be included in the meaning of such term for purposes of section 15(b) (other than paragraph (6) thereof)." https://www.sec.gov/divisions/marketreg/mrfreqreq.shtml
Again, this rule very clearly (as clear as you can put in a regulation) does not impact retail traders.