US binary options “deep in the money” says Forest Park BX CEO Justin Hertzberg

The shift in interest between Europe and its Transatlantic counterpart has been quite remarkable over recent months, in that binary options platform providers which are responsible for the vast majority of provision of software to the hundreds of brands had stuck firmly to the OTC principle, with their respective brands being centered in Cyprus, the Middle East and the Asia Pacific region.

Until recently, many binary options brands and platform companies had no plans to enter the exchange-based US market, however a dramatic change has taken place and platform companies SpotOption, TRADOLOGIC and TechFinancials have all developed solutions that are compatible with Cantor Exchange and become market makers on the Chicago-based dedicated binary options venue.

The interest in participating was immediate, and Forest Park BX was quick off the mark to offer binary options via Cantor Exchange, using the venerable SpotOption platform, marking itself out as the very first market maker to provide retail binary options to a US audience.

Forest Park BX CEO Justin Hertzberg looks at the lucrative prospects for binary options in the land of opportunity that is America.

Last month, another LeapRate guest editorialist published an article entitled, “Did Cantor Fitzgerald just Legalize Gambling in the US?” While it was an eye-catching title (it caught mine), the sensational title missed what is truly sensational about the CFTC registered Cantor Exchange, in that it has revolutionized the way binary options are traded.

Binary options aren’t new. The U.S. binary options market has existed since 2004 when the North American Derivatives Exchange (“NADEX”, then HedgeStreet) offered the first binary options called Hedgelets. Outside the U.S., there are a number binary options brokers from which traders can choose. But both on-shore and off-shore binary options venues have their shortcomings.

NADEX, for example, has more or less held a monopoly on the U.S. binary options market since its inception, but it has largely floundered, failing to capture the interest of introducing brokers and traders alike. Perhaps it is the large minimum contract size ($100/contract), or the fact that the trading platform can be difficult to navigate, or that NADEX charges $1,000 for its API specs or that, despite being an exchange, market making is reserved for only a few institutional entities.

Whatever the reason(s), the U.S. market has not particularly gravitated to NADEX and binary options trading.

Outside the U.S., however, dozens of brokers, offering a myriad of platforms and a casino-like atmosphere have given binary options a ‘sex appeal’ that has led to strong growth in the sector. But like any casino, the house always has the edge. For binary options traders, this often means having to risk $100 to make $77 on a trade, which is tantamount to a Vegas croupier asking a bettor to place $100 on red or black…only with much worse odds.

Enter the Cantor Exchange, a non-intermediated binary options exchange that enables every participant (trader) of the exchange to be a market maker. As a result, traders are no longer forced to be price takers always playing against the house. In fact, there is no house.

The Cantor Exchange does not act as the counterparty to your trades; rather it functions merely as a centralized exchange where participants can buy and sell from one another in a fair and open environment. And with binary option contracts worth only $1, traders large and small can participate on the exchange.

Moreover, traders can freely use the Cantor Exchange’s API specs to develop their own market making or trading algorithms or trade through a customized front-end platform developed by industry leader SpotOption. And with plans to add trading platforms from other major platform developers like TechFinancials, and TradoLogic, the Cantor Exchange is positioning itself as the most accommodative binary options venue in the world.

And the timing of the Cantor Exchange could not be better. In a post-SNB world where OTC traders are fearful of broker insolvency, commingled funds, debit balances and counterparty risk, the Cantor Exchange offers traders the ability to trade FX, Commodities and Index (coming soon) binary options via segregated accounts in a fully-paid for, broker-free exchange.

While time will tell just how disruptive the Cantor Exchange will be to the U.S. binary option landscape, the investor in me thinks the Cantor Exchange will end up deep in the money.

This is a guest editorial which was compiled by, and represents the views of Justin Hertzberg, CEO, Forest Park BX.

  • So it does not appear that I am “bashing” cantor. I want to start off first saying I have an account at Cantor. I have for about 2 years. I have seen it go from Request for quote market making – to no contracts to trade – to its new format trader only market making with no obligated liquidity providers. I like the new format better than their old one. I have placed trades on Cantor off an on often being the entire book for the day before as they have been getting their start and I love that there is an IB out there pushing Cantor kudos to Justin! A couple years ago when Justin was an IB Nadex really needed to clean some things up. They have brought on a new CEO, more market makers, more markets, more expirations, adjusted strikes widths to ensure more opportunity, release ipad, android, iphone, windows app and have a desktop pro platform, and have made a lot of enhancements to their web platform as well. I have asked for a lot of things from Nadex over the years for me as a trader and for other traders and they have implemented many of those things and I know they plant to implement more.

    Regarding it being difficult to trade on nadex. It only takes 1 click on pro and 2 clicks on nadex web to enter a contract no different than Cantor. There is also a free binary scanner for nadex that allows you to see all the expirations you want all the markets you want on one page with risk reward all that in one place. I made this and made it free to help traders make trading on Nadex easier. Cantor has the inverse logic which can be a bit confusing on order entry till you get use to it on the shorts (I heard they are fixing this).

    It appears one of the factual errors was edited out (of the article) after I brought this up. the mentioning of the API costing $25k has been edited on the article to be 1k. Still not free but not 25k. Major kudos to Cantor for making API cheap and free regardless smile emoticon and I am glad they where able to edit the article to fix this inaccuracy.

    Regarding Making Markets.

    To make a market on Cantor, Nadex, or any exchange on the planet simply post a price. if your price is better than someone else’s you will have the best bid offer hence you have made a market. This is not unique to Cantor as it is not unique to any exchange. (though you are forced to on on most bucketshop binaries that are not regulated by the CFTC). So on either exchange Cantor or Nadex you are not forced to be a price taker you just have to make a price if you dont like the one listed and someone has to fill it for you to get filled.

    A liquidity provider is someone or a company who has contractually obligated themselves to make a market. This opportunity is not limited to a select few institutions (as stated in article). If you are willing to commit to making a market on all contracts on all markets your willing to make markets on then everyone is welcome. Obviously since you have to make a market as you are becoming a liquidity provider you must have the appropriate funds to be able to post trades on both sides of all contracts at all times. You can partner with nadex as a liquidity provider if you want to.

    Currently (to my knowledge) there are no contractually obligated liquidity providing market makers on Cantor. There may be in the future and I hope there are. What does this mean. Well if you take out the book ie 50 contracts for .20 would require a $10 risk to wipe out the book. Then if you want to get out and someone took the book on the other side. No one is required to make a market. So you may or may not be able to exit. Depending on if someone is willing to take your bid or offer. Take out the book and see if it instantly refills if at all. I have done this a few times only to realize no one wanted to make another market on that side.

    Cantor is growing it did 7311 contracts yesterday. Which is massive from where it has been.

    Being a 1/100th the size of Nadex that would equal doing 73.11 contracts on Nadex.

    Nadex did 26,648 contracts.contracts being 100x larger that would equal 2,646,800 cantor contracts.

    So in comparison we are looking at in just 1 day
    Cantor 7,311
    Nadex 2,646,800 (equalized in size x 100 of cantor)

    Regarding Size & Liquidity & Alternatives
    Cantor is an alternative for traders with smaller accounts and that is freaking awesome but for someone wanting to trade 10 50 100 contracts that would mean liquidity necessity of 1000, 5000 10000 at cantor So at this point it is not competing. Cantor is growing it will most likely get there but just putting the real numbers in perspective here. I have seen some 1000 quotes etc.. on cantor i did 500 the other day. But for instance right now (at this very moment – may change in 10 minutes etc..) there is not a single market or single expiration on cantor quoting 100 or more contracts (15 on UJ all expirations/strikes 5 on GJ and 70 on EU), . And again take out the book and you have to wait for someone being willing to make a quote. I have seen largers sizes. Just giving a live analysis. Again this is not to stop you from trading on it. it does not stop me. It is to ensure your aware of what it means to not have a contractually obligated market maker ensuring liquidity and trade accordingly. As cantor grows this will of course be less and less of an issue.

    Regarding Fees:
    Fees are .01 a contract it takes 100 contracts to equal a nadex contract so if doing a 100 that would be 1.00. Nadex is .90 cents and caps at $9.00 ie do 10 20 or 30 (ie this would be like doing 1000, 2000 or 3000 at cantor) and your fee would still be $9.00 per leg a side versus at cantor same equalized size that would $10 $20 $30 per leg/side. (both do not charge anything if the option expires OTM). Again not a big deal until cantor has the size to do this but just trying to give you an apples to apples as the savings mount up on the capped fees at nadex once a trader starts to some size.

    Regarding the US not being attracted to Nadex:
    Nadex is growing at a rate of 35 to 50% quarter over previous annual quarter and has been doing so consistently year after year. This is before international trading was opened up. So to say the US market has not gravitated to Nadex seems a bit without merit and based on the daily trade report logs I expect this to be a monster quarter as well.

    My favorite thing about Cantor:
    My favorite thing about Cantor is the rolling strikes how if the market moves it runs out. I have no idea how they got that approved being a defined option but its a sweet feature!

    Regarding Contracts
    Cantor has less markets and expirations than Nadex but is working on adding more markets and maybe more expirations. One thing very unique between the two is Nadex has spreads which are really among my favorite to trade. I trade both binaries and spreads. But spreads are freagin sweeet! Little harder to get and 100x easier to trade once you get em.

    Regarding the Future:
    I am excited about Cantor and what it brings to the option world and look forward to its future. I like the setup and its unique opportunity the way the contracts are setup. It will not disrupt Nadex. If anything the success of Cantor will help Nadex grow and vice versa. This is great for us as trades as the more traders there are the more liquidity there is and the tighter the bid offers will become.

    • Michael

      Do a summary and resend please 🙂

      • To much to say to summarize just going to have to take 20 seconds and read it 🙂

    • Matt Grassa

      Great summary/comparison of both exchanges Darrell. Thank you for Apex Investing and all that you do.


US binary options "deep in the money" says Forest Park BX CEO Justin Hertzberg


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