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Screenshot of a breaking news alert e-mail from Q2 2017
The U.S. Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight announced today that it has issued the results of a rule enforcement review of the North American Derivatives Exchange Inc. (Nadex), with the review results being fairly positive. Nadex is a regulated Binary Options exchange, owned by UK based online trading leader IG Group Holdings plc (LON:IGG).
The review, which covered a one-year target period, evaluated Nadex’s compliance with elements of the CFTC’s Core Principles 2 (Compliance with Rules) and 12 (Protection of Markets and Market Participants), including compliance with relevant CFTC regulations related to these Core Principles.
The CFTC review found that Nadex allocates staff, information technology, and other resources to comply with Core Principles 2 and 12. Nadex also maintains a rulebook, and written policies and procedures for its staff. However, the CFTC made certain recommendations and identified certain deficiencies as noted below.
The CFTC made three recommendations regarding Nadex’s: (i) capacity to detect and investigate rule violations; and (ii) its compliance staff and resources. The CFTC also identified three deficiencies relating to Nadex’s trade practice investigations. The review found that Nadex was deficient with respect to its compliance with CFTC regulation 38.158, which requires an exchange to conduct an investigation upon the discovery or receipt of information indicating that a rule violation may have occurred. The cFTC also found that, in certain instances, Nadex failed to adequately investigate or document potential rule violations by its members or market makers.
In addition, although Core Principle 7 (Availability of General Information) was not a focus of the review, The CFTC also identified a deficiency related to this core principle. The CFTC found that during the target period, Nadex failed to disclose relevant information regarding its market maker programs, as required by CFTC regulation 38.401(a). Nadex has since cured this deficiency pursuant to a rule filing effective July 2017.
The CFTC’s full review of Nadex can be found here (pdf).