The North American Derivatives Exchange is the only US binary options trader as yet, opening a new market for traders
The relative simplicity and seeming safety of binary options has long proven attractive to traders. While negativity has surrounded binary options trading, regulations in the US look set to create a better market.
In the wake of regulatory upheaval, the North American Derivatives Exchange (NADEX) has been appointed by the Commodity and Futures Trading Commission (CFTC) the first exchange for trading binary options US-wide. NADEX says of binary options that they “are straightforward, limited risk derivatives. Based on a simple yes/no proposition, they offer an intuitive way to trade the financial markets with relatively low collateral.” Based on the value of underlying financial futures and spot forex rates, NADEX trades binary options on stock indices, forex, commodities and economic events, all of which are subject to regulatory oversight by the CFTC.
Although having long been touted as a means of controlling risk, lowering costs and heightening returns, many traders have labeled the ability to predict the changing fates of stocks or commodities on a short-term basis – without related announcements – nigh on impossible.
Aside from the guesswork tactics associated with binary options are the many and various methods of fraud and manipulation which have contaminated the practice. Most common of these is the outright non-payment of profits to a broker account, with the best form of protection being in researching the platform, considering user reviews, and in taking into account the longevity of the firm’s operations. Another common case of fraud is in the usage of illegitimate financial data, with corrupt brokers altering the expiry times of data or illegally reconfiguring payout rates. The best protection against this is in determining the data source and in analysing the legitimacy of statistical changes this way.
Regardless of CFTC regulatory compliance, NADEX is yet to clear the deep-founded wariness of binary options amongst traders. As the firm persists as the only binary options trader in the US, its continued and legitimate operations will likely go some way in offsetting the negative perception of binary options trading.