- What is Nadex?
- Who regulates Nadex?
- Where does Nadex hold your money?
A 21st century financial exchange for the future of trading
Nadex, the North American Derivatives Exchange, came into being as a new kind of financial exchange where all types of traders can participate in a wide range of markets—on a level playing field, with guaranteed limited risk.
Let’s take a look at the name Nadex and break it down a bit further.
Nadex is based in the Chicago, Illinois in the heart of the financial district. Though we are US-based and regulated, with all member funds in segregated accounts in US banks, Nadex accepts members from dozens of countries around the world.
Not the derivatives you may have learned about in high school math! Derivatives are simple instruments that, believe it or not, are already part of your everyday life. If you have car insurance or a mortgage, you are already using derivatives that are far more complicated than a binary option or a spread contract. Derivatives “derive” their price from an underlying market. Their value goes up and down based on the movement of another market, like stocks, commodities, or currency exchange rates. Instead of buying and selling actual stocks or barrels of oil, you trade a derivative of the price.
Nadex is an exchange, like the New York Stock Exchange or Chicago Mercantile Exchange, only newer. Like those exchanges, Nadex is regulated, by the CFTC (Commodity Futures Trading Commission), the same government agency that regulates the CME, CBOT, NYMEX, and other major financial exchanges. As an exchange, Nadex's primary function is to match buyers and sellers in an unbiased manner.
As a regulated exchange, Nadex is never on the other side of your trade. Neither Nadex nor its employees trade on the exchange at all. Your order is matched to another trader or one of Nadex's multiple market makers, larger institutions which agree to provide liquidity. While one of Nadex's market makers is an affiliate of Nadex which may take the other side of your trade, CFTC regulations preclude Nadex from giving its affiliate any advantages over any other market maker. On the Nadex exchange, all participants are treated fairly.
Nadex is a different kind of exchange. As the first and largest binary options exchange in the United States, Nadex is designed for the individual trader. Unlike most other exchanges which are predominately designed for institutions or highly capitalized individuals, Nadex provides contracts which offer a lower financial barrier to entry as well as strictly limited risk (i.e. – no margin calls).
Some key questions that every trader, no matter where they are trading, should always ask about a firm are: Are they regulated and by whom? How and where is my money held? And will they ever trade against me?
Regulation – Nadex is regulated by the CFTC (Commodity Future Trading Commission), the U.S. Government organization tasked with ensuring the integrity of the futures and swaps markets. As such, Nadex has clearly defined rules and must act within the boundaries set forth by the CFTC.
Safety of Funds – At Nadex, all member funds are held in segregated bank accounts in accordance with CFTC regulations. These funds are held in only top-tier U.S. banks such as BMO Harris and Fifth Third. This ensures that when it comes time to make a withdrawal, your money will be there.
- What Nadex is: the first and largest regulated binary options exchange in the US
- Who regulates Nadex: the CFTC, which also regulates the CME, CBOT, and other major exchanges
- How your funds are held: in a segregated member account in a major US bank