Nadex to implement new expiration value calculation procedure this week

North American Derivatives Exchange, Inc. (Nadex), a subsidiary of IG Group Holdings plc (LON:IGG), is implementing a new procedure for calculating expiration values this week.

Nadex had informed the Commodity Futures Trading Commission (CFTC) about its intentions to amend the procedure in November 2016 but in December it issued an emergency notice saying the deployment of the changes had to be put on hold because additional technological work was needed to ensure the process functions properly.

The latest notice from Nadex says the amended procedure, which adds precision to the calculation, will be deployed to Demo environment during the week of June 5th, whereas the Production launch is scheduled for the week of June 12, 2017. The Exchange warns that as a result of this, during this week the expiration values in the Demo and Production environments may not be identical.

Under the new procedures, if 25 or more trades in the case of non-FX products, or 10 or more midpoints in the case of FX products, are collected in the last 10 seconds leading up to expiration of the Nadex contract, Nadex would include all trades (or midpoints) collected during that time period in the data set used to calculate the contract’s expiration value.

Previously, only the last 25 trades in the case of non-FX products, and the last 10 midpoints in the case of FX products were used for the calculation.

Under the new procedures, the highest 20% and lowest 20% of non-FX products’ trades will be removed from the data set. All remaining prices in the data set will be averaged and rounded to one decimal point past the precision of the underlying market (except for the Wall Street 30).

Previously, the highest and the lowest 5 trade prices were excluded.

For Forex products, the new procedures stipulate that the highest 30% and lowest 30% of midpoint prices will be removed from the data set. All the remaining prices in the data set will be averaged and rounded to one decimal point past the precision of the underlying market.

Previously, the highest and lowest 3 midpoints were from the data set, and the calculation was based on the 4 midpoints left.

In case the time to collect 25 trades of non-FX products, or 10 or more midpoints of FX products, surpasses 10 seconds, then the expiration value calculation method will not change.

Expiration value calculation and settlement procedures for Event contracts will stay the same.