Head Trader

A head trader is the manager of a trading business, responsible for the positions, risk, and ultimately, the profitability of that business. In a registered securities firm, the head trader supervises all traders and other personnel within his or her purview and may also trade themselves. Most notably, the head trader is charged with ensuring regulatory and internal compliance for every employee who is part of the trading operation (i.e., not just traders). A head trader may also be referred to as a "head of trading."

Any head trader in a securities operation with supervisory and/or approval responsibilities must be a registered principal, meaning they must hold all the basic securities licenses and possess one of the following certifications:

• Series 4: Registered Options Principal Exam (OP)
• Series 9 and 10: General Securities Sales Supervisor Examination
• Series 23: General Securities Principal Exam - Sales Supervisor (GP)
• Series 24: General Securities Principal Exam (GP)
• Series 51: Municipal Fund Securities Limited Principal Examination
• Series 53: Municipal Securities Principal Examination (MP)

The exact principal exams required depend on the scope of the head trader's responsibilities. In smaller firms, there may only be one or two head traders, but in large firms there are frequently many head traders, each in charge of a specific market. The head trader for municipal securities, for example, would have, at a minimum, a Series 53 license. Different licenses apply for futures and commodities trading operations. A registered options principal, for example, will hold a Series 4 license.

In many environments, such as wealth management companies or money managers, a head trader may report to a chief investment officer and a chief operating officer and will have a key role in fulfilling and executing individual trade requests. Head traders may also be responsible for creating and maintaining relationships with external brokers and custodians. A head trader should be among the most knowledgeable individuals at a firm regarding the markets and trading architecture/environment. Some specific head trader job responsibilities may include:

• Managing trades from inception to post-trade analysis, including building trades, pre-trade analysis, execution and settlement.
• Ensuring compliance with regulations and that best execution policies are adhered to.
• Designing trade architecture, trading policies and procedures, as well as broker evaluation and trading record keeping.
• Assisting portfolio managers with rebalancing and asset allocation tasks.

As rapidly changing regulations change the day-to-day responsibilities of head traders their role has shifted away from actively trading and toward more of a compliance and supervisory role. In Europe in particular, the MiFID II regulations are shifting head traders' daily priorities away from trading and toward market structure and regulation changes rather than keeping abreast of what the markets are doing. While being a seasoned trading expert is essential to becoming a head trader, the role now may allow for only a small amount of time actually trading securities.