Nadex to Offer Bitcoin Derivatives Trading to U.S. Retail Investors in December

Nadex announced it plans to launch bitcoin binary options contracts in early December, subject to filing with the Commodity Futures Trading Commission (CFTC).

To novices, Binary Option Contracts are considered to be the simplest form of trading stocks, indices and currencies. Photo: Ars Electronica/Flickr

To novices, Binary Option Contracts are considered to be the simplest form of trading stocks, indices and currencies. Photo: Ars Electronica/Flickr

Nadex (The North American Derivatives Exchange) , an electronic exchange that allows trading in a number of financial derivatives, formerly known as HedgeStreet, has  announced it plans to start bitcoin binary options contracts in early December, subject to filing with the Commodity Futures Trading Commission.

Nadex has noticed strong customer demand from retail traders seeking for new ways to trade bitcoin. Similar to other binary options contracts on Nadex, investors can trade based on where they think the bitcoin binary contract is heading using daily or weekly contracts. A binary contract is one in which the payoff can take only two possible outcomes: a fixed amount or nothing at all.

The company will list the daily and weekly bitcoin binary options contracts with prices based on TeraExchange’s Tera Bitcoin Price Index (“TeraBit Indexsm”), the global benchmark for USD/XBT contracts, according to the press release.

Timothy McDermott, CEO of Nadex, said:

“Bitcoin binary options are an exciting way to participate in the bitcoin phenomenon while limiting risk,” said . “Our innovative short-term contracts provide a way to trade in a transparent, regulated market where the trader’s exposure is known before any transaction is executed. This is especially valuable given the bitcoin price volatility that has often been experienced in the marketplace.”

Bitcoin has appeared to be an extremely popular digital currency that has been increasing  acceptance and demand over the past five years. At present, in order to take a view on bitcoin or trade the product, retail traders have to buy or sell actual bitcoins on a bitcoin exchange.

Nadex’s bitcoin binary option contract will allow traders to bargain price movements of the popular digital currency without the risk of holding actual bitcoins, giving traders’ unparalleled access to this appealing market.

Speaking to Forex Magnates reporters, Mr. McDermott said: “Nadex had to go through the steps required in developing any contract for listing on a regulated exchange. In terms of the process of filing with the CFTC, however, we had to submit the proposal formally prior to launch, but we have been in discussions with CFTC staff in advance of that expected filing.”

He continued: “The CFTC has probably been the most proactive regulator in a positive way in connection with bitcoin, in terms of looking at the potential benefits that digital currencies and a distributed blockchain can offer the financial markets and the commercial world generally.”

Nadex elected the TeraBit Index for determining the Bitcoin price because it is the only price index that is calculated by a CFTC regulated firm, and the price index had already been thoroughly evaluated by the CFTC.

Leonard T. Nuara, President and Co-founder of TeraExchange, said:

“Since launching the TeraBit Index in September we have been approached by a wide array of financial services firms for this benchmark. By working with Nadex to launch its bitcoin binary options, we are thrilled to help make another regulated marketplace available to those looking to take directional views on bitcoin.”

TeraExchange is the industry’s first and only multi-asset class central limit order book with an all-to-all platform across interest rate, credit and FX (foreign exchange) derivatives for all clearable swaps contracts.

It also incorporates “Directed Orders” within the order book, request-for-quote (RFQ) and request-for-market (RFM) trading protocols. As well as its SEF, TeraExchange enables an execution management system, broad industry connectivity and pre-trade credit checking.

TeraExchange has been authorized to operate as a Swap Execution Facility by the Commodity Futures Trading Commission.

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