Nadex Deploys New Expiration Value Calculation and Settlement Procedures

Notice Type Notice ID
Rulebook & Agreement 855.060117

On November 23, 2016, North American Derivatives Exchange, Inc. (“Nadex”, the “Exchange”) submitted to the Commodity Futures Trading Commission (the “Commission”) its intent to amend its settlement procedures for all currency, commodity, and indices contracts.  The implementation of the new settlement procedures was delayed as additional technological work was needed, and Nadex indicated that it would provide notice via the Notices webpage when the new procedures would be deployed.  Accordingly, Nadex is announcing that the new expiration value calculation and settlement procedures will go into effect in its Demo environment for trade date June 5, 2017, and in its Production environment for trade date June 12, 2017.

Under the new procedures, in instances where 25 or more trades in the case of non-FX products[1], 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.  For non-FX products, the highest 20% and lowest 20% of trades will be removed from the data set.  The 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 which will be rounded to the point of precision of the underlying market).  For foreign currency products, the highest 30% and lowest 30% of midpoint prices will be removed from the data set.  The remaining prices in the data set will be averaged and rounded to one decimal point past the precision of the underlying market.  For both non-FX and foreign currency products, if the removal of the highest and lowest 20% of trades (or 30% of midpoints) would result in a non-integer number of trade (or midpoint) prices, the number of the number of trade (or midpoint) prices to be removed from the data set will be rounded down to the nearest integer.  In the event that the time it takes to collect 25 trades in the case of non-FX products, or 10 or more midpoints in the case of FX products, exceeds 10 seconds then the expiration value calculation method will remain unchanged from the current process. 

Expiration value calculation and settlement procedures for Event contracts will be unaffected, and will continue to settle based on the current process.

Specific expiration value calculation and settlement procedures for each product class is set forth in the contract specification, located in the Nadex Rulebook in Chapter 12. 

Please be advised that during the week of June 5 the new procedures will be deployed to the Demo environment, however, the current expiration calculation method will remain in effect for the Production environment.  Therefore, during this week the expiration values in the Demo and Production environments may not be identical.  Contracts in the Production environment will settle based on the expiration value calculated under the current calculation method.  Beginning on trade date June 12, 2017 the calculation procedure will be the same in the Demo and Production environments.

If you have any questions regarding the new settlement procedures, please feel free to contact Nadex Client Services at (877) 776-2339 or customerservice@nadex.com.

 

[1] Note that pursuant to the Self-Certification Submission filed with the CFTC on January 20, 2017, and Notice 823.012017, the Nadex Crude Oil and Natural Gas will continue to use the original expiration value calculation procedure until Reuters is able to provide time precision to the second in those corresponding underlying markets.

Should you have any questions or require further information, please contact the Compliance Department.