Nadex seeks authority to limit trading privileges to minimize risk for market and members

Maria Nikolova

Nadex wants to limit trading privileges in cases where such an action may reduce risk, or otherwise protect the Exchange, the Members and the Market.

North American Derivatives Exchange, Inc. (Nadex), a subsidiary of IG Group Holdings plc (LON:IGG), has filed a notice with the United States Commodity Futures Trading Commission (CFTC), seeking to tighten the rules for the measures it may take against market participants in order to protect itself, its Members and the market.

The notice, dated April 7, 2017, specifies that “Nadex may, in its sole discretion, deny any Member application, or suspend, revoke, limit, condition, restrict, or qualify the trading privileges of any Market participants or their Authorized Trader(s) as it deems necessary or appropriate”.

Nadex explains that these measures will be applied in cases where there has been no breach of its rules that could lead to disciplinary action, but where Nadex has decided that an action is necessary “to minimize risk, or otherwise protect the Exchange, the market, or its Members”.

In case there are no objections from the CFTC, Nadex’s proposed rule changes will become effective as of April 25, 2017.

In a separate notice with the CFTC, Nadex also proposed changes to its rules governing membership applications. Under the proposals, the Exchange “may return any account balance and terminate any account upon the discovery that the Membership Application was completed by anyone other than the named individual identified on the Membership Application.” Another change concerns Nadex’s right to retain jurisdiction over anyone who initiates a transaction on the Exchange (directly or via an intermediary), even after termination or revocation of the person’s trading privileges. In case these proposals do not face opposition from the CFTC, they will also become effective April 25, 2017.

This is the second important set of changes proposed by Nadex this year. In January, the Exchange informed the CFTC of its intentions to change its rules for handling of customer orders. The changes sought to better reflect Commission Regulation 38.152, or, putting it otherwise, the requirements against abusive trading practices.

Nadex’s strict stance when it comes to providing a regulated environment to traders was underlined by Nadex’s CEO Tim McDermott who, in an interview with FinanceFeeds, has noted 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.”

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