Head Trader
The head of an independent trading company or the trading department at a registered securities firm or other financial institution
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What is a Head Trader?
A head trader refers to either the head of an independent trading company or the head of the trading department at a registered securities firm or other financial institution that conducts trading in the financial markets.
Summary
- A head trader may be either the head of an independent trading company or the head of the trading department at a registered securities firm or other financial institution that conducts trading in the financial markets.
- The primary role of a head trader is to supervise other traders and ensure that their firm’s trading operations are in full compliance with all relevant laws and regulations.
- Head traders are required to obtain appropriate trading licenses and certification from the governing regulatory body in their country.
Job Responsibilities of a Head Trader
1. Ensure regulatory compliance with local, state, and federal laws and regulations
A head trader’s primary job responsibility is to ensure regulatory compliance with local, state, and federal laws and regulations. He or she is also charged with making sure that all of the company’s own rules and regulations are also followed. In such regard, they are responsible for the actions of all employees involved in the company’s trading operations.
2. Oversee the company’s trading positions and risk management
The head trader is additionally responsible for overseeing the company’s trading positions, risk management, and for the profitable operation of the company’s trading activities. Specific job responsibilities may include record-keeping, evaluation of traders or portfolio managers under their supervision, recruitment and training of new traders, and working with portfolio managers to manage risk and rebalancing of assets held in their portfolios.
A head trader may be employed by a stock brokerage firm, a bank, an investment company, a hedge fund, or a private trading firm. They may report to a chief investment officer (CIO), chief financial officer (CFO), or chief executive officer (CEO).
Licensing Requirements
In the United States, the head of trading at a registered securities firm – such as a stock brokerage – is required to be a registered principal of the firm. In order to hold such a position, the individual must obtain the basic securities trading licenses– such as a Series 7 and Series 63 license – from the Financial Industry Regulatory Authority (FINRA). In other countries, head traders are licensed and regulated by similar regulatory agencies.
In addition, they must obtain the specific securities licenses that correspond with the type(s) of trading and any other activities – such as sales to clients – that they oversee. Among the most commonly held licensing certifications of head traders are the following:
- Series 23 – General Securities Principal (Sales)
- Series 53 – Municipal Securities Principal
- Series 4 – Registered Options Principal
The Changing Role of Head Traders
Increased financial regulations, such as the European Union’s MiFID II, are dramatically changing the role and day-to-day job responsibilities of head traders.
Head traders are rarely directly involved in executing trades anymore. Instead, their job description is much more slanted toward the oversight of their firm’s traders and ensuring compliance with all relevant laws and regulations. It is somewhat ironic that an individual usually only rises to become a head of trading by virtue of extensive experience in trading, but once achieving the position, they subsequently see very little involvement in executing trades themselves.
They are typically, however, directly involved in such activities as developing, choosing, and managing trading systems or strategies that the traders under their supervision are to employ. The advent of high-frequency trading (HFT), algorithms, and artificial intelligence (AI) trading software programs has shifted the role of head of trading to one that requires increased technical knowledge.
In addition, they are charged with keeping up to date on changes in financial markets and market structure, data analysis, reporting, and developing internal procedures. They are also commonly directly involved in sales in the form of recruiting new clients for their firm.
One of the few places where a head trader may still spend much of their time actively trading is at small, private asset management companies or hedge funds. It is more likely to be the case where a company distinctly divides its trading activities according to different types of financial instruments or in line with different geographic regions.
Keep Reading
CFI offers the Capital Markets & Securities Analyst (CMSA)™ certification program for those looking to take their careers to the next level. To keep learning and developing your knowledge base, please explore the additional relevant resources below:
