The U.S. Commodity Futures Trading Commission (CFTC) has notified North American Derivatives Trading Exchange Inc. (NADEX) of the results of a rule enforcement review completed by the Commission’s Division of Market Oversight.
NADEX is one of two dedicated binary options exchanges in the United States, along with Cantor Exchange, as the provision of binary options in the United States is only permissible via exchanges in order to provide transparent details of transactions, all of which are public information.
The CFTC review covered the target period from June 15, 2011 through June 15, 2012, during which the Division of Market Oversight evaluated NADEX’s compliance with Core Principles 2 (Compliance With Rules) and 12 (Protection of Market Participants), which relate to an exchange’s trade practice surveillance program.
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The Division found that NADEX maintains an adequate trade practice surveillance program, including adequate staff, systems, investigatory work and sanctions.
The Division also found specific areas where NADEX should improve its trade practice program. Among other items, the Division recommended that NADEX improve the recordkeeping of its investigation logs and investigation memoranda.
With respect to the composition of NADEX’s Regulatory Oversight Committee (ROC), the Division recommended that NADEX implement tie-breaking procedures to resolve tie votes in its ROC, or alternatively, the Exchange should ensure that the committee is composed of an odd number of members greater than one.