Nadex clarifies process for contesting Compliance Department’s findings

Maria Nikolova

Nadex plans to implement the changes to its rules on June 19, 2019.

North American Derivatives Exchange (Nadex), a subsidiary of IG Group Holdings plc (LON:IGG), has been keeping a close eye on any suspicious activities by members and has taken appropriate actions when necessary. For instance, in April this year, Nadex banned Evan Watson over violations of a set of rules, dedicated to prohibited transactions and activities. The Exchange plans to amend its rules concerning Investigations, Hearings, and Appeals.

On June 4, 2019 Nadex submitted a self-certification to the Commodity Futures Trading Commission (CFTC), providing notice of its intent to amend its Rule 9.2 Investigations, Hearings, and Appeals to more closely reflect the language in the relevant CFTC Regulations, and to further clarify the hearing process.

Nadex has a compliance department. The Chief Regulatory Officer is responsible for overseeing the compliance department. The Compliance Department investigates unusual trading activity or other activity that the Compliance Department has reasonable cause to believe could constitute a violation of these Rules. Nadex retains hearing officers, who adjudicate findings by the Compliance Department that are disputed by Members.

Under Nadex’s rules, the Compliance Department endeavors to complete any investigation within twelve months, unless there exists significant reason to extend it beyond such period. The Member whose activity is the subject of the investigation may contest the Compliance Department’s findings by forwarding a response to those findings by electronic mail to the Compliance Department within 15 days. If the findings of the Compliance Department are contested, the Compliance Department’s report and the Member’s response contesting the Compliance Department’s findings and/or proposed sanction(s) will be submitted to a Nadex hearing officer.

The Member respondent shall be provided reasonable notice of the hearing date. Prior to the rule change, the deadline was set at 20 days after the receipt of the Member’s response contesting the compliance officer’s finding and/or proposed sanction.

According to the amended rules, at least 28 days in advance of a hearing, the Member respondent shall submit to the Compliance Department, and the Compliance Department shall submit to the Member respondent, copies of all books, documents, records and other tangible evidence, which each plans to rely on or refer to during its direct case at the hearing, and provide a list of the names and titles of witnesses that each plans to call on its direct case at the hearing. Previously there was no time limit specified, the Member was expected to submit the evidence prior to the hearing.

Promptly after that hearing, the hearing officer will issue findings, which will be delivered to the Member by electronic mail to the Member’s last known email address. Previously, the deadline to do so was 20 days after the hearing.

Nadex plans to implement these new rules and amendments on June 19, 2019.

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