Nadex amends definition of “emergency” to comply with CFTC regulation

Maria Nikolova

These changes will become effective on November 4, 2019.

North American Derivatives Exchange (Nadex), a subsidiary of IG Group Holdings plc (LON:IGG), has informed the Commodity Futures Trading Commission (CFTC) of its intent to amend its Rules 1.1 Definitions, 2.4 Emergency Rules, 3.1 Trading Members – Applications, Classifications, and Privileges, 5.5 Order Entry, and 7.1 Adjustments.

The list of proposed changes includes amended definition of “emergency” to add language from CFTC Regulation 40.1(h).

This CFTC rule states:

(h) Emergency means any occurrence or circumstance that, in the opinion of the governing board of a registered entity, or a person or persons duly authorized to issue such an opinion on behalf of the governing board of a registered entity under circumstances and pursuant to procedures that are specified by rule, requires immediate action and threatens or may threaten such things as the fair and orderly trading in, or the liquidation of or delivery pursuant to, any agreements, contracts, swaps or transactions or the timely collection and payment of funds in connection with clearing and settlement by a derivatives clearing organization, including:

  • (1) Any manipulative or attempted manipulative activity;
  • (2) Any actual, attempted, or threatened corner, squeeze, congestion, or undue concentration of positions;
  • (3) Any circumstances which may materially affect the performance of agreements, contracts, swaps or transactions, including failure of the payment system or the bankruptcy or insolvency of any participant;
  • (4) Any action taken by any governmental body, or any other registered entity, board of trade, market or facility which may have a direct impact on trading or clearing and settlement; and
  • (5) Any other circumstance which may have a severe, adverse effect upon the functioning of a registered entity.

Nadex’s amendment adds “failure of the payment system or bankruptcy or insolvency of any participants” to the definition of “emergency”. Thus, the amended rule 2.4c states:

For the purposes of this Rule, an “emergency” is:

  • (i) any activity that manipulates or attempts to manipulate the Market;
  • (ii) any actual, attempted, or threatened corner, squeeze, or undue concentration of positions;
  • (iii) any circumstance that may materially affect the performance of the Contracts traded on, Nadex, including failure of the payment system or bankruptcy or insolvency of any participants;
  • (iv) any action taken by the United States, any foreign government, any state or local governmental body, any other contract market or board of trade, or any other exchange, market, facility, or trade association (foreign or domestic) that may have a direct impact on trading on Nadex;
  • (v) any circumstances that may have a severe, adverse impact upon the physical functions of Nadex including, for example, natural disasters such as fire or flood, terrorist acts such as bomb threats, physical plant breakdowns such as plumbing, heating, or air conditioning problems, system breakdowns such as power, telephony, cable, trading systems, or computer systems failures or interruptions to communications, the network, or the Internet;
  • (vi) the imposition of any injunction or other restraint by any government agency, court, or arbitrator that may affect the ability of a Member to perform on Contracts;
  • (vii) any circumstance in which it appears that a Nadex Member or any other person is in such operational condition, or is conducting business in such a manner, that such person cannot be permitted to continue in business without jeopardizing the safety of Nadex Members or Nadex itself; and
  • (viii) any other unusual, unforeseeable, and adverse circumstance which, in the opinion of the governing board, requires immediate action and threatens or may threaten such things as the fair and orderly trading in, or the liquidation of or delivery pursuant to Contracts traded on Nadex.

These changes will become effective on November 4, 2019.

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