According to a company announcement, IG’s CFTC regulated exchange, the North American Derivatives Exchange (Nadex), proclaimed that subject to a filing with the U.S. Commodities and Futures Trading Commission (CFTC), it will offer its clients the ability to trade Bitcoin derivatives through binary options contracts.
The offering is expected to go live in early December, starting with daily and weekly Bitcoin binary options contracts with price quotes obtained from TeraExchange’s Tera Bitcoin Price Index (“TeraBit Indexsm”).
While Tera Exchange offers swaps based on its TeraBit Index for institutional traders, the soon-to-be-available offering by Nadex pioneers a new investment product for the for U.S. retail investors.
The effort put in by the company was in response to a rising demand from its customers, with the process of finalizing the product offering passing through due diligence before going live.
Speaking to Forex Magnates’ reporters, the company’s CEO Tim McDermott shared, “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.”
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“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,” he concluded.
In the U.S., binary options contracts have to be traded on an exchange, regulated by the CFTC. The offering is known in the industry as all-or-nothing-options, with the investor purchasing a contract on an exchange, with the payoff conditional to only two possible outcomes: a fixed amount or nothing at all.
Mr. McDermott elaborated on the offering explaining, ”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.”
The selection of the TeraBit index has been the most prominent option for Nadex, since it is the only Bitcoin price index calculated by a CFTC regulated company.
TeraExchange’s President and co-Founder, Leonard T. Nuara, elaborated in the announcement, ”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.”
Best of all, U.S. retail investors are getting an opportunity to make investment decisions based on the price of Bitcoin without actually holding on to the digital currency and exposing themselves to the rapid price swings in the market.