Nadex seeks to amend rules on order entry to minimize risks

Maria Nikolova

An order rate limiter aims to cap the maximum number of orders that may be submitted to Nadex per second (or per a specific time period expressed in seconds) per Trading Member.

North American Derivatives Exchange, Inc. (Nadex), a subsidiary of IG Group Holdings plc (LON:IGG), is planning amendments to its Rulebook that seek to prevent risks for the Exchange.

According to a submission with the US Commodity Futures Trading Commission (CFTC), Nadex is planning to change its Rule 5.5, and the part concerning entering orders, in particular. Under the proposed amendments, an order rate limiter functionality will cap the maximum number of orders submitted to Nadex per a given period.

The amended rule will state:

“A Trading Member, who is not engaged in activity pursuant to a Market Maker Agreement, will enter orders to trade Contracts by electronic transmission over the Internet. Order rate limiter functionality will cap the maximum number of orders that may be submitted to the Exchange per second (or per a specific time period expressed in seconds) per Trading Member or Authorized Trader of a Trading Member, in order to prevent a risk of harm to the Exchange”.

In case the CFTC has no objections, Nadex intends to implement the changes from July 11, 2017.

Last week, FinanceFeeds reported of other changes planned by the Exchange in order to tackle malignant activities. Nadex intends to amend its Rule concerning Prohibited Transactions and Activities in order to prohibit the intentional or reckless disregard for the orderly execution of transactions during the closing period.

In April this year, Nadex proposed amendments to its Rulebook that would allow it to limit trading privileges in cases where, although no Rule violation that could lead to disciplinary action may have occurred, Nadex has seen the limitation as necessary to reduce risk and protect the Exchange, the market, and/or its Members. These additional restrictions will apply to cases where an individual makes verbal or written threats to Nadex and/or its staff, an individual submits an excessive number of emails or phone calls to Nadex; an individual makes an excessive number of minimal deposits or withdrawals throughout the trading day, etc.

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