CFTC Grants Partial Relief to Binary Exchanges

The U.S. Commodity Futures and Trading Commission (CFTC) is granting what is termed “no-action” relief (meaning, essentially, no action required, as detailed in the relief) to NADEX and the Cantor Exchange, the two principal, CFTC-authorized U.S. binary options trading exchanges.

All binary options trading in the U.S. has to take place on a regulated exchange. The CFTC has prohibited all over the counter (OTC) binary options trading in the U.S.

According to the terms of the relief, which was announced in separate letters to the two exchanges, they will no longer be required to report their transactions to swap data repositories. The conditional relief also grants them exemption from having to retain the bulk of related records to such transactions. However, the CFTC is still requiring the exchanges to maintain required records that are available for inspection whenever the CFTC may request them.

The two exchanges had requested the relief stating that they are already in compliance with all applicable reporting and recordkeeping requirements.

The two exchanges had requested the relief stating that they are already in compliance with all applicable reporting and recordkeeping requirements. In requesting the relief, the exchanges also pointed out that all transactions are cleared by CFTC authorized entities and not through any third party clearing entity.

The granted conditional relief applies to all binary options and spread contracts accepted by the two exchanges and their clearing subsidiaries as well, but its contingent on all transactions being adequately margined or fully collateralized. In addition, the CFTC noted that it is still requiring the exchanges to promptly publish information on transactions and positions following trade executions.

Nadex is a U.S. subsidiary of IG Group, a U.K.-based firm that offers trading in a wide range of derivatives, including spread betting, forex, binary options, and contracts for difference (CFDs). The Nadex exchange handles trading in thousands of investment instruments, including cryptocurrencies and commodities.

The Cantor Exchange is a subsidiary of U.S.-based Cantor Fitzgerald, a firm that offers trading, investment banking, brokerage services, as well as commercial real estate financing. Cantor handles binary options, forex, weather, and commodity trading.