Exclusive: Binaryoption.com goes live, serving American customers – Full report
North America’s longstanding electronic futures trading industry has more in common with the retail binary options sector than first meets the eye. Whilst OTC binary options trading and the method by which it is being sold by many brands has become the bete noire of regulatory authorities around the world and the mainstream media, America’s […]
North America’s longstanding electronic futures trading industry has more in common with the retail binary options sector than first meets the eye.
Whilst OTC binary options trading and the method by which it is being sold by many brands has become the bete noire of regulatory authorities around the world and the mainstream media, America’s alignment of binary options with exchange traded futures via two dedicated exchanges based in Chicago, the heartlands of America’s institutional derivatives sector, will be the savior of the longevity of this particular trading style.
Technologically focused binary options platform providers such as O-SYSTEMS, with its new O-SYSPRO fully automated binary options platform have embraced this and are looking toward establishing presences in the United States, O-SYSTEMS having exemplified this via its courtship of Cantor Exchange this year in preparation for signing a vendor agreement.
Most certainly, the two exchanges that provide binary options trading via a central venue, NADEX and Cantor Exchange, are setting forth a sustainable means of elevating binary options trading into the realms of futures traders and as a result, represent a totally different segment to those in the OTC sector.
This week, a significant new entrant into the US market arrived on the scene, under the brand binaryoption.com which is a retail binary options brokerage based in New York, serving North American clients, regulated by the National Futures Association (NFA) as an introducing broker (IB).
According to US law and NFA regulations, binary options companies in the United States are required to be registered as an IB and lodge a net capital adequacy of $45,000 for regulatory purposes, as well as have a vendor agreement with either NADEX or Cantor Exchange.
In January this year, FinanceFeeds spoke to Rich Jaycobs, president of Cantor Futures Exchange at the company’s office in Park Avenue, New York. Mr. Jaycobs explained a critical difference between Cantor Exchange traded binary options and the non-U.S. OTC model. That is, only Cantor Exchange is permitted to have access to client orders and access to customer funds.
“Customers of Cantor Exchange deposit directly into the exchange’s regulated clearinghouse and funds are never touched by any broker” explained Mr. Jaycobs.
“Clients are self-directed, there is never a broker. That means that no broker can touch their order, or their money. Clients putting funds directly into the exchange means that those funds go into a special segregated client funds account. We do permit properly registered U.S. companies to receive an incentive payment for referring clients to Cantor Exchange.
We call these companies “Referring Participants” but sometimes these companies are loosely referred to as ‘brokers’ by others. But, these companies are actually more similar to an IBs, or Introducing Brokers, than they are brokers. In my conversations with most companies they view the relationship between Cantor Exchange and its Referring Participants as begin more affiliate-like than it is broker-like.”
Meeting in April with Tim McDermott, CEO of NADEX, FinanceFeeds took a further look at the US market. “Binary options traders in regions where OTC trading is the norm are quite a different demographic to those in North America, therefore have different trading requirements and a different approach to the market” said Mr. McDermott during a meeting with FinanceFeeds in Chicago.
In terms of differentiating factors, Mr. McDermott told FinanceFeeds “Operating the OTC shop’s sales model in many regions has become a very high cost business model, because it is manpower intensive, as it is dependent on the sales people on the phone.”
“The US has a different type of customer to a degree but what I think is actually interesting about the US, is that the potential customers do not quite know yet if they are going to become customers, because the market is so nascent” he said.
“Ultimately, the activities that have occured in other regions that have created a bad name have been limited in America, and the regulators have made sure that those who do not act in accordance with correct practice will not be allowed to operate at all and the ethos with regard to operations of a retail binary options company is very much subject to the same strict guidelines as the retail FX industry here in the US” he said.
Binaryoption.com which is registered as an IB and a Commodity Trading Advisor (CTA) with the NFA under the number 0488435, operates from an office in Broad Street, in downtown Manhattan, is clearing all of its trades via Cantor Exchange, and is fully operational in terms of trading and can now accept clients.
The company concentrates solely on the US domestic market, offering support in Spanish and English.
Photograph taken from Cantor Exchange’s New York headquarters, 499 Park Avenue, New York. Copyright FinanceFeeds