Series 57 Syllabus — Blueprint & Learning Objectives

This syllabus is based on FINRA’s official Series 57 Content Outline (2 major job functions). Use it as a checklist: cover every objective, then drill questions until you can identify the compliant execution/reporting outcome quickly.

What’s covered

• F1 — Trading Activities (82%)
• F2 — Maintaining Books and Records, Trade Reporting and Clearance and Settlement (18%)

F1 — Trading Activities (82%)

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Market Making Status, Roles & Basic Requirements

• Explain the role of the floor broker and how floor-based and electronic trading workflows can differ at a high level.
• Explain what a market participant identifier (MPID) is and why firms may use multiple MPIDs for quoting and trading.
• Differentiate qualified OTC market maker, qualified third market maker and qualified block positioner concepts at a high level.
• Describe responsibilities and expectations for a qualified block positioner conceptually.
• Identify what it means to register as a market maker and why quoting obligations and registration status matter.
• Explain why net capital requirements matter to market making and trading activity (high level).
• Recognize voluntary termination of registration concepts and when quotation withdrawal rules can apply (high level).
• Identify why payments for market making can create conflicts and are regulated (high level).

Order Types, Modifiers & Time-in-Force

• Differentiate market, limit, stop and stop-limit orders and match each to execution certainty vs price certainty tradeoffs.
• Explain market-on-open (MOO) and market-on-close (MOC) orders at a high level and recognize their timing sensitivity.
• Differentiate day vs good-til-canceled (GTC) orders and how time-in-force affects order handling responsibilities.
• Explain reserve (iceberg) and pegged order concepts and why they can affect displayed liquidity.
• Identify how order modifiers/stipulations can change execution behavior and why clear customer instructions matter.
• Recognize that some order types are venue-specific and traders must follow the venue’s rules and definitions (high level).

Market Access (DMA/Sponsored Access) & Pre-Trade Risk Controls

• Differentiate direct market access (DMA) and sponsored access concepts at a high level and identify why both require controls.
• Explain the purpose of the SEC Market Access Rule (Rule 15c3-5) and why firms must implement risk management controls.
• Identify examples of pre-trade risk controls, including automated blocks and supervisory alerts (conceptual).
• Explain why firms set credit limits and capital limits for market access and how limits reduce systemic and firm risk.
• Recognize that traders must not bypass risk controls and that violations can trigger supervisory escalation (exam style).

Clearly Erroneous Trades (Obvious Errors)

• Identify factors used to determine whether a transaction may be clearly erroneous (high level).
• Differentiate transaction nullification vs adjustment outcomes and when each can occur (conceptual).
• Recognize that clearly erroneous reviews are process- and deadline-driven and require prompt escalation and documentation.
• Identify why “obvious error” handling protects market integrity and customers (high level).

Display, Execution & Trading Systems (ADF/ATS) and Order Entry

• Explain common order entry parameters at a high level (symbol, price, size, side, time-in-force, modifiers).
• Describe trading rotations conceptually and how order matching can occur during specific auction/rotation periods (venue-driven).
• Explain the Alternative Display Facility (ADF) purpose at a high level and identify what types of quoting/trading activity it supports.
• Explain what an alternative trading system (ATS) is and how ATSs differ from exchanges (high level).
• Recognize that locking/crossing restrictions can apply and that quoting must comply with applicable access and display rules (high level).
• Identify the purpose of quote and order access requirements and how access issues can become compliance complaints (high level).

Prohibited Activities, Manipulation & Insider Trading Risk

• Identify prohibited activities such as trading ahead of research reports and explain why rules restrict these practices.
• Explain insider trading risk at a high level and recognize that misuse of material nonpublic information is prohibited.
• Identify manipulative trading schemes such as prearranged trading, spoofing and pump-and-dump, and recognize typical fact patterns.
• Recognize that conduct intended to intimidate or influence other market participants is prohibited and must be escalated.
• Explain the purpose of Exchange Act anti-manipulation provisions and Rule 10b-5 at a high level.
• Identify that firms must maintain policies and procedures to prevent misuse of MNPI and that traders must follow escalation protocols.

Quotes, IOIs, Trade Advertisements, Halts & Volatility Pauses

• Explain quotation publication concepts and recognize that quoting can be restricted during trading halts (high level).
• Differentiate trading halts and volatility trading pauses conceptually and identify why orders/quotes may be restricted.
• Explain what an indication of interest (IOI) is at a high level and recognize restrictions on publication during halts.
• Recognize halt and imbalance crosses conceptually and why they can affect execution prices.
• Identify what trade volume advertising is and why published trade information must be accurate and compliant.
• Explain what an offer at a stated price is conceptually and recognize relevant publication restrictions (high level).

IPOs, Secondary Offerings, Penalty Bids and Regulation M Safe Harbors

• Identify permitted and prohibited trading activity around IPOs and secondary offerings (high level).
• Explain penalty bid concepts and why notice and syndicate covering transaction rules can apply (high level).
• Explain stabilizing bids conceptually and identify the purpose of stabilization rules in offerings.
• Describe passive market making in offering contexts and identify why specific rules limit activity during distributions.
• Recognize notification requirements and firm controls related to IPO trading activity (high level).
• Explain the purpose of Regulation M and safe harbors for distribution participants and issuers/selling shareholders (high level).
• Recognize that short sales in connection with public offerings are restricted under Regulation M and identify the compliance theme (fact pattern driven).

Non-Listed and Penny Stocks (OTC Quoting, Form 211 and Rule 15c2-11)

• Define penny stock conceptually and identify characteristics that make penny stocks higher-risk.
• Recognize disclosure requirements and compensation disclosures commonly associated with penny stock transactions (high level).
• Explain OTC quoting and trading concepts and how they differ from exchange trading (high level).
• Explain the purpose of SEC Rule 15c2-11 and what it means to initiate or resume quotations with specified information.
• Recognize Form 211 as a FINRA process for initiating or resuming market making in OTC equity securities (high level).
• Identify minimum quotation size and minimum pricing increment concepts for OTC equity securities (high level).
• Recognize customer limit order display requirements in OTC contexts (high level).
• Identify locking/crossing restrictions and multiple quotation medium issues as common compliance traps in OTC quoting.

Options Trading (Orders, Exercise/Assignment, Limits)

• Differentiate common option strategies and order types at a high level, including spreads, straddles and combinations.
• Recognize index option concepts (e.g., VIX options) and how index options can differ from equity options (high level).
• Explain exercise and assignment concepts and how assignment risk affects short option writers.
• Describe the tender of exercise notice conceptually and how exercise notices are allocated (high level).
• Identify the purpose of position limits and exercise limits and why firms must monitor customer and firm positions.
• Recognize reporting obligations related to position limits and why traders must escalate limit issues promptly.

Short Sales (Reg SHO: Locates, Price Test, Close-Outs, Marking)

• Define a short sale at a high level and explain why short selling introduces borrowing and delivery risk.
• Explain locate and borrow concepts and why firms must have procedures to prevent naked short selling.
• Explain the Regulation SHO price test (circuit breaker) conceptually and identify when short sale restrictions apply.
• Describe close-out requirement concepts and why failures-to-deliver can trigger mandatory close-outs.
• Differentiate order marking requirements (long/short/short exempt) and recognize how marking supports compliance and reporting.
• Identify short sale exemptions at a high level and recognize that fact patterns will signal when an exemption applies.
• Recognize that short sales are reportable and that accurate reporting supports surveillance and market integrity (high level).

Handling Customer Orders and Best Execution

• Differentiate regular market hours vs pre-market and after-hours trading and identify unique risks of extended-hours trading.
• Explain best execution obligations and identify the key factors considered in execution quality (price, speed, likelihood, size/type, market conditions).
• Describe stop order handling concepts and common risk scenarios (gaps, triggers, and execution uncertainty).
• Explain order adjustment concepts for corporate actions such as stock splits and dividends (high level).
• Explain fair prices and commissions concepts and recognize scenarios that can indicate unfair pricing.
• Differentiate agency vs principal and recognize net transactions with customers and related disclosure themes (high level).
• Explain order marking concepts in customer order handling and why accurate marking supports supervision and audit trails.

Trading Ahead and Other Prohibited Practices (Customer Order Protection)

• Identify trading ahead of customer orders as a prohibited practice and recognize common front-running scenarios.
• Explain why manipulative or deceptive devices are prohibited and how misleading trade practices can violate rules (high level).
• Recognize prohibited transaction concepts for investment advisers at a high level and why they can intersect with trading activity.
• Identify the compliance theme: protect customers, avoid misuse of information, and escalate conflicts or suspicious activity.

Regulation NMS (Order Protection, Limit Order Display, Sub-Penny)

• Explain order protection and trade-through prevention concepts at a high level (protecting displayed quotes).
• Describe customer limit order display requirements and why they support transparency and fair execution.
• Explain the Sub-Penny Rule/minimum price increment conceptually and identify why quoting in sub-pennies is restricted.
• Recognize that Regulation NMS rules interact with routing and best execution decisions and must be followed in execution workflows (high level).

F2 — Maintaining Books and Records, Trade Reporting and Clearance and Settlement (18%)

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Trade Reporting Facilities and Reporting Requirements

• Differentiate common reporting facilities (e.g., ADF, TRFs, OTC reporting facilities) and identify why reporting venue depends on the security and execution context.
• Explain trade reporting timing and accuracy expectations and why late or inaccurate reporting creates regulatory risk.
• Recognize common report fields and modifiers conceptually and how modifiers affect trade acceptance and transparency.
• Explain the purpose of timely transaction reporting requirements and how they support market surveillance.
• Identify the purpose of audit trail requirements in trade reporting facilities (high level).
• Recognize multiple MPID usage for trade reporting and why firms must control MPID assignment and reporting integrity.
• Explain exemptions from trade reporting obligations for certain ATS scenarios at a high level (fact pattern driven).
• Recognize that the obligation to honor trades is part of the trade reporting/processing workflow (high level).

Order and Transaction Records (CAT/COATS), Large Trader and Books & Records

• Explain the Large Trader concept at a high level (Exchange Act Rule 13h-1) and why Large Trade ID reporting and monitoring exist.
• Identify the types of order execution and routing information that firms must capture for supervision and regulatory reporting (conceptual).
• Explain the purpose of Consolidated Audit Trail (CAT) reporting and why timing and required fields matter (high level).
• Explain what COATS is at a high level and why options-related audit trail reporting exists.
• Recognize books-and-records requirements under SEC Rule 17a-3 and how records support audits and investigations.
• Explain pre-time stamping concepts and why timestamp integrity supports compliance and surveillance (high level).
• Recognize clock synchronization requirements and why accurate timekeeping is essential for audit trails.
• Explain ATS transparency concepts at a high level and why transparency rules exist for market structure oversight.
• Differentiate order execution information vs order routing information disclosure concepts under Regulation NMS Rules 605 and 606 (high level).

Clearance and Settlement (Confirmations, OCC Assignment, Close-Outs)

• Identify key customer confirmation content requirements at a high level and why confirmations support transparency and investor protection.
• Differentiate standard settlement time frames for common products conceptually and recognize that cycles can vary by product and rule changes.
• Explain Options Clearing Corporation (OCC) exercise and assignment concepts and how assignment procedures affect settlement obligations.
• Describe close-out requirement concepts for various products and why fails-to-deliver must be resolved promptly.
• Explain the role of the Uniform Practice Code conceptually and why standard settlement practice reduces operational risk.
• Recognize when-issued, as-issued and if-issued trading concepts at a high level and identify why conditional trading creates settlement and cancellation risk.
• Explain ex-dividend/ex-rights processing concepts and why due-bill style allocations can be required around distribution dates (high level).
• Recognize delivery date concepts and why “good delivery” and proper documentation reduce settlement breaks.

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