Nadex Receives Certain CFTC Exemptive Relief Due To Its Different Business Model

Friday, 17/01/2014 | 22:59 GMT by Steven Hatzakis

The IG Group subsidiary operating under the name North American Derivatives Exchange, known as Nadex, just had its request granted by the CFTC for relief from specific requirements deemed not applicable to its business.

Nadex Receives Certain CFTC Exemptive Relief Due To Its Different Business Model

The Commodity Futures Trading Commission has just announced that it issued exemptive and interpretive letters providing relief from certain otherwise binding regulatory requirements that it has since deemed are not applicable to the North American Derivatives Exchange , known as Nadex, a subsidiary of UK headquartered Broker IG Group.

One of the only two known firms in the U.S to offer binary options style FX trading on a regulated Derivatives Clearing Organization (DCO) facility, Nadex has just reported its best metrics in its history, as reported by Forex Magnates earlier in January 2014

The CFTC has also amended Nadex's registration order, on its own initiative, and approved the amendment for Nadex to better align the terms and conditions of Nadex’s registration order with the Commodity Exchange Act, as amended by the Dodd-Frank Act, and the Commission’s current regulations, according to the CFTC press release.

The exemptive letter and interpretive letter by the CFTC was in response to a request from Nadex, based on its registration status as a registered derivatives clearing organization (DCO), and the CFTC's Division of Clearing and Risk (DCR), acting under delegated authority from the CFTC, issued the exemptive letter that grants Nadex relief from certain provisions of the Commission’s regulations applicable to DCOs, and also issued the interpretative letter that addresses the applicability of certain regulatory provisions to Nadex.

The request from Nadex was noted as having been prompted by the Commission’s 2011 adoption of regulations that implemented Dodd-Frank Act amendments to the Commodity Exchange Act “core principles” for DCOs. These regulations address issues that arise in connection with a typical intermediated derivatives clearing model, However, as described in the official press release, Nadex’s clearing model is different in that it features non-intermediated clearing of transactions in fully-collateralized products.

Because of this, according to the CFTC, Nadex requested that DCR provide relief from compliance with regulatory provisions that are inapplicable to Nadex’s model, and it requested an interpretation regarding applicability of and compliance with other regulatory provisions, hence the provided interpretation letter in today's announcement.

The news follows Nadex's former CEO, Yossi Beinart's appointment to take the helm of the Tel Aviv Stock Exchange, and departure from Nadex on the heels of its record volumes for 2013.