Hello, I have seen similar post all over the internet. "true exchange", and confusion about IG and Nadex, OTC versus exchange, SIPC etc… Most of the responses are misinformed due to lack of information. Let me try to clarify and address each of the issues you have brought up with accurate “reality” information.
Nadex is an exchange regulated by the CFTC with the same exchange classification as the CME.
Nadex does not trade against you it only has an interest in exchange fees just like the CME.
A “true exchange” faciliates transactions between buyers and sellers (market makers and traders, traders and traders etc…) without interest in the position offering anonymity to the other side of the trade (not know if the other person is getting in/out winning/losing). This is how Nadex operates.
No futures or forex trades are covered by SIPC on CME, NYMEX, COMEX< or otherwise sipc is for securities. SIPC does have a cap though it is larger than the average traders account. With Nadex your funds are segregated.
http://www.nadex.com/why-nadex/your-funds-are-segregated.html
Even still, with Nadex you get massive buying power leverage so you don’t need a lot in the account. Therefore you don’t need to keep a large amount of money in the account just keep your allotted risk capital as you can fund the account in about 3 seconds if needed. Note this is wise to do no matter what type of account you have let your checking/savings grow. Having just your trading account grow and not pulling money beats the point of trading which is to make money so you need to pull it out to make it. It also leads to over trading as the account grows by trading to large and giving it back.
IG Group is a holding company (hence group) that own multiple companies across the globe. It is a publicly traded company. Meaning it is owned by members who own stock shares.
Many companies, CME Group (cmegroup.com) included, that are publicly traded own multiple companies this is not odd or irregular at all.
Notice CME is actually CME Group (holding multiple exchanges in ownership)
Example:
Who owns Nymex exchange (ie where metals energies etc… are traded) ? Answer CME Group one member. CME Group Who is then owned by shareholders.
Who owns Nadex exchange? IG Group (igroup.com), who is owned by share holders. Same thing…So the statement trying to compare member owned to non-member owned exchange is not accurate.
IG Group is regulated the the security laws of the London Stock Exchange in the financial services sector, investment services sub sector and is included in the following indices Ftse all share, ftse 350 high yield, fste 250, ftse all-share (ex IT), FTSE 350 (ex IT), FTSE MID 250 (ex IT), Ftse 350. Making over 180 Million last year alone. However all it subsidiaries are regulated by the countries in which they operate (ie Nadex is regulated by the CFTC)
IG Group owns multiple companies just like CME owns multiple companies. It brought in over 400 million in gross revenue in 2012. It is not a small company that will simply disappear like the buckets shops that can be started for $25,000 in Australia, cyprus, virgin islands, etc…
Also i think you are mistaken IGindex/IGMarkets for IG Group. IGIndex/Markets are binary trading companies owned by IG Group for non-US Residents under the regulations of their specific country.
IG Group is not a market maker. IG Group does own market makers. However, there are very strict regulatory walls there is no disclosure of personal account trades or information between the market makers and nadex ever.
Contrary to popular misinformed belief market makers are not evil or bad. In fact they are extremely helpful. Hence Market Maker (Make a market) they help fill orders to both buyers and sellers. They bring liquidity to the market.
The market makers transaction volume is important as it gives them a larger “book” to lay off risk so they are able to have more liquidity and lay off risk so they can survive and keep making a market. Market makers who make markets on Nadex make markets across the world and are easily able to lay off risk. They do not care if you win/lose they are there to take the order and give it to someone else. They are there to make a market.
Without a market maker often you would have difficulty getting orders filled on futures, stock, options, and even nadex markets. You want to have market makers so you have liquidity.
Market makers desire to make money on the bid/ask spread (the difference between where bought and sold). A true market maker is a trader who hedges off risk by buying from one and selling to another.
Their goal is not to trade against you (for example as you may be selling to exit and they are buying - you are now flat and they are long so they are not trading against you as you exited the market - they now want to unload the long contract to a buyer by selling it to them.)
If the market maker goes through an exchange like CME, NYSE, CBOT, Nadex etc… they do not know who you are, they do not know if you are getting in or getting out, they do not know if you are winning and losing, they only know that there are this many orders at this price to buy or sell.
There are also other market makers coming onto Nadex as well soon.
However, trading OTC as you have mentioned is a different story. This is often when someone is trading against you and also has your money. When you lose they win. When you win they lose. As you can imagine this can easily blur the lines of true intent and can causes things to be manipulated and I do recommend staying away from any OTC bucket shop broker out there.
Fortunately there is now a regulated exchange for binaries in the United States overseen by the CFTC that we can use to trade binaries, and the nadex spreads with confidence.
[quote=traderji1]at thid stage it seems only exchange traded Binary option are on Nadex ( excpet there are 2 binary option on CBOT which are not liquid)
And I would prefer anything Exchange traded over OTC ( due to counterparty risk) however I am still not 10% sure if NADEX is a TRU exchange!
Part of my mind doubts it becasue
- It is owned by IG group which is a OTC/ Market Maker in AUS adn UK
- It is 100% owned by one entity not a member owned EXCHANGE like CME, ASX etc
Althiugh Nadex says they have dedicated Market makers like( other excganges) what if the main and only MM is IG itself!
In worst case scenario if a US SIPCV coverd broker ( Options, Stocks) goes out of business your money is protected
Nadex is not covered by SIPC!
Hence my concern… I have seen an OTC broker collapse in AUS and worried
Does anybody know what the reality is?[/quote]
