The North America Derivatives Exchange (Nadex), one of only two US-regulated binary options exchanges, generated an annual growth of 37% in trading volume in the third quarter of 2016, according to a statement published by Nadex on Wednesday. The exchange also reported a jump of 53% on the year in the number of binary option trades executed in the July-September period. The broker did not provide exact figures.
Nadex said it has seen quarterly increases in volume and total trades for 19 of the last 20 quarters.
This sustained growth points to an important movement: demand for limited-risk alternatives to conventional trading, the statement read. According to Nadex, retail traders are increasingly showing interest in exchange-traded binary options, attracted by their low fees, low minimum deposit, and guaranteed limited risk.
According to the platform, more and more investors in the US are becoming aware of the benefits that regulated exchange-traded binary options provide, such as security. By engaging with unregulated, illegal brokers and trusting them their money, traders are highly vulnerable. Nadex is the largest exchange regulated by the US Commodity Futures Trading Commission (CFTC) that offers limited-risk trading in binary options.
“We’re no longer just trying to introduce the concept of limited-risk trading,” said Nadex CEO Timothy McDermott. “People are aware of it. Now our job is to get them asking, ‘If I can trade the same markets with limited risk on a CFTC regulated exchange – with lower fees and capital requirements – why not?’ Frankly, we hope everyone starts asking that question,” he added.
Initially, there were three exchanges licensed by the CFTC to offer binary options trading in the country. One of them, however, was caught trading off-exchange contracts earlier this year and had to cease operations, which additionally made investors think before choosing an illegal operator. In addition to Nadex, Cantor Exchanges is the only other CFTC-licensed binary options exchange.
Chicago-based Nadex offers more than 10,000 trading products via its proprietary trading platform, which is available in web-based and mobile versions. Its offering includes a wide range of instruments – forex and cryptocurrencies, commodities and stock indices. It is the US unit of IG Group, an international forex and binary options brokerage house headquartered in London and listed on the London Stock Exchange (LSE).
Binary options are a very controversial trading instrument. They are the closest thing to gambling in the online trading world. Investors guess whether the price of a certain instrument, would go upwards or downwards within a pre-determined time frame. Once the time is up, the option is deemed expired and the bet is settled. Depending on the outcome, a trader either collects a profit, or loses money.
In many jurisdictions these type of instruments are not regulated, while in others they are somewhat or fully allowed. In the US trading in binary options is restricted to on-exchange only. In neighboring Canada, on the other hand, binary options are not forbidden, but no brokers are authorized to offer them.