Registered Options Principal (ROP)

What Is a Registered Options Principal (ROP)?

In the financial sector, a Registered Options Principal (ROP) is a professional who has passed the Series 4 exam and is therefore qualified to oversee options trading activities at a financial firm. ROPs are often senior employees at brokerage firms, responsible for overseeing the firm's options exposure and the options portfolios in client accounts.

Understanding Registered Options Principals (ROPs)

Individuals wishing to become ROPs must first pass the Registered Options Principal Qualification Examination, better known as the Series 4 exam. This test, which is overseen by the Financial Industry Regulatory Authority (FINRA), consists of 125 multiple-choice questions in addition to 10 unscored pre-test questions. Its contents are focused on the supervisory responsibilities needed to ensure that all options trading activities comply with applicable financial regulations.

ROPs are trained to supervise the trading of options based on various types of underlying assets, including those based on stocks, foreign currencies, interest rates, stock indexes, or various derivative products. Given the wide variety of products involved, as well as their complexity, firms will often employ multiple ROPs. In some cases, one person is designated as the principal while another is designated as the alternate ROP. These positions are often reserved for senior members of the firm, such as its partners, officers, or directors.

In addition to passing the Series 4 securities license course, candidates wishing to obtain the ROP designation must also pass at least one of the following prerequisite exams: the Series 7 and the Securities Industry Essentials exam, which are administered by FINRA.

Real World Example of a ROP

In the United States, the Series 4 exam focuses on six topic areas relating to various aspects of the ROP's professional responsibilities. These include the compliance requirements related to new options-trading accounts, the risk management associated with clients' options trading, the supervision of other employees involved in the options-trading process, and the protocols involved in communicating around real or potential options trades.

In Canada, prospective ROPs must complete the Options Supervisors Course (OPSC), which is provided by the Canadian Securities Institute. This course covers similar subject matter as FINRA's Series 4 exam, but it is tailored to more closely reflect the Canadian capital markets.