Nadex seeks to amend its rules for handling of customer orders

Maria Nikolova

Nadex aims to change its rules to better reflect the CFTC regulations that prohibit abusive trading practices.

North American Derivatives Exchange, Inc. (Nadex), a subsidiary of IG Group Holdings plc (LON:IGG), has informed the United States Commodity Futures Trading Commission (CFTC) of its intent to introduce changes to its rules for handling of customer orders.

The notice, dated January 20, 2017, outlines several proposed changes to Nadex’s Rule 5.7, with the Exchange specifying that these amendments are set to better reflect Commission Regulation 38.152, or simply put, the requirements against abusive trading practices.

The CFTC regulations (Section § 38.152) stipulate that “a designated contract market must prohibit abusive trading practices on its markets by members and market participants.” Any trading ahead of customer orders, trading against customer orders, accommodation trading, and improper cross trading, is outlawed. The list of specific trading practices that should be prohibited by designated contract markets include front-running, wash trading, pre-arranged trading (with certain exception), fraudulent trading, and money passes.

In line with these specific requirements, Nadex is making two amendments, the first being the removal of the word “knowingly” from its prohibition on FCM Members or AP/employees trading against customer orders. Following the change, Rule 5.7 (c), (i), states that:

“No FCM Member or AP/employee thereof in possession of a FCM Customer Order may (deletion of “knowingly” made here – Ed.) enter into a transaction opposite such FCM Customer Order directly or indirectly for him/herself or any other Person with whom such FCM Member or AP/employee has a direct or indirect financial interest.”

The rule is apparently becoming stricter, prohibiting this type of abusive trading practices exercised “unknowingly” too.

The other amendment is more formal – Nadex is adding the term “front-running” to its Rule prohibiting trading ahead of customer orders. Thus, Rule 5.7 (d) is set to state that:

“Trading Ahead (Front-Running) of Customer Orders Is Prohibited”.

In case the CFTC has no objections, the amended rules will become effective February 6, 2017.

Concerning this particular section (§ 38.152) of the law, it is worth noting that it was shaped after, back in December 2010, the CFTC issued an announcement on proposed rulemaking. The Commission proposed new rules and amended guidance and acceptable practices to implement the provisions enacted by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).

Nadex’s proposals are hardly surprising to anyone familiar with the strict position of the company regarding meeting regulatory demands and offering high-quality products and services to their clients and partners.

This was underlined by Nadex’s CEO Tim McDermott who, in an interview with FinanceFeeds last year, said that:

“US customers are used to trading on regulated exchanges. They trade equities, stocks and futures on exchange. It is a different mentality of trader that makes up the market place here in America compared to other regions, and therefore companies must be able to offer that kind of clientele an exchange traded product that the customers feel comfortable with, this being a component within a regulated, normalized exchange based market.”

“We want market makers which are registered on our exchange to make our members’ experience the best it can possibly be. If they are successful as well, then thats how it should work. Our end game is that we should have quality markets, which have attributes such as tight, deep markets, and lots of assets”, said Mr McDermott.

Read this next

Digital Assets

Kraken acquires TradeStation’s cryptocurrency business

Kraken, the second-largest U.S.-based cryptocurrency exchange, has acquired the cryptocurrency arm of online brokerage TradeStation.

Retail FX

The Funded Trader is back? Traders report account closures

Prop trading firm The Funded Trader has updated its website with a few banners, nearly three weeks after it ceased all operations, with claims for a relaunch in the near future. However, there was no official statement on the relaunch on its website, Discord channel, or social media accounts yet.

Executive Moves

NAGA lures former Tickmill compliance exec Loukia Matsia

NAGA Group, a provider of brokerage services, cryptocurrency platform NAGAX and neo-banking app NAGA Pay, appointed Loukia Matsia as their new Head of Compliance and Anti-Money Laundering (AML).

blockdag

Explore 2024’s Top Cryptocurrencies: BlockDAG Leads With 30,000x ROI Potential, Among Surge Predictions For Bitcoin And Ethereum

Navigating the vast ocean of cryptocurrencies might feel overwhelming for many investors, whether seasoned or newbies.

Tech and Fundamental, Technical Analysis

EURUSD Technical Analysis Report 18 April, 2024

EURUSD currency pair can be expected to fall further toward the next support level 1.0600 (which reversed the price earlier this month).

Digital Assets

Binance ordered to remove Changpeng Zhao to get Dubai license

Binance, the world’s largest cryptocurrency exchange, has obtained a Virtual Asset Service Provider (VASP) license in Dubai.

Crypto Insider

Evolution and current state of global crypto adoption

Every four years, the crypto world gets hyped for the Bitcoin halving. Past halvings, like the one of May 2020, saw a massive increase in BTC transactions, which was driven by growing adoption and community involvement.

Digital Assets

Binance set to re-enter India with $2 million fine settlement

Binance, the world’s largest cryptocurrency exchange, is preparing to re-enter the Indian market after agreeing to pay a $2 million fine, according to a report by the Economic Times.

Chainwire

Over 1,000 Builders, Partners, Investors and Enthusiasts Gather at Inaugural Global Event to Celebrate Sui

Last week in Paris, over 1,000 blockchain enthusiasts from 65 countries gathered at the inaugural Sui Basecamp during Paris Blockchain Week. This milestone event showcased major announcements and drew a global community, highlighting Sui’s impactful strides in blockchain technology.

<