National Commodities Futures Exam
The Series 3 exam qualifies individuals to sell commodity futures contracts and options on commodity futures. It is a two-part exam covering futures market knowledge and regulatory requirements. The exam is administered by FINRA on behalf of the National Futures Association (NFA) and is required for anyone acting as an Associated Person (AP) of a futures commission merchant (FCM), introducing broker (IB), commodity trading advisor (CTA), or commodity pool operator (CPO). Candidates must be sponsored by an NFA member firm.
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Practice Questions
Test your knowledge with these Series 3-style questions. Click an answer to check if you are correct.
1. A futures trader's account falls below the maintenance margin level. The trader must deposit enough to bring the account back to:
Correct: A. In futures trading, when an account falls below the maintenance margin, the margin call requires the trader to deposit enough funds to bring the account back to the initial margin level -- not just the maintenance level. This is different from securities margin, where the call typically requires restoring to the maintenance level.
2. A corn farmer expects to harvest 50,000 bushels in three months. To hedge the price risk, the farmer should:
Correct: B. A farmer who will sell corn in the future is exposed to the risk of falling prices. By selling (shorting) corn futures, the farmer locks in a selling price. If corn prices decline, the gain on the short futures position offsets the lower price received for the physical corn. This is a classic short hedge.
3. When a call option on a futures contract is exercised, the holder receives:
Correct: A. When a call option on a futures contract is exercised, the holder receives a long futures position at the strike price, and the writer is assigned a short futures position at the strike price. The option converts into a futures position, not physical delivery or cash settlement (those occur through the futures contract itself).
4. Which federal agency has primary regulatory authority over commodity futures markets?
Correct: C. The CFTC is the federal government agency with primary regulatory authority over commodity futures and options markets. The NFA is a self-regulatory organization, not a government agency. The SEC and FINRA regulate securities markets, not commodity futures.
5. The "crack spread" refers to the price relationship between:
Correct: C. The crack spread represents the price difference between crude oil and its refined products (gasoline and heating oil). It reflects the refining margin. The term "crack" refers to the cracking process used to refine crude oil. The soybean/soybean products relationship is called the "crush spread."
Related Exams
These exams are commonly pursued alongside or in addition to the Series 3.
General Securities Representative
The broadest securities representative qualification. Many futures professionals also hold the Series 7 to sell securities products alongside commodity futures.
Securities Industry Essentials
The foundational securities industry exam. While not required for the Series 3, the SIE is needed if you also plan to obtain FINRA representative registrations.