I’m very excited to present to you this Cantor Exchange Review today mainly because this post may signal an upcoming revolution in the binary options niche. But before I tell you more about Cantor Exchange, let me share some background information with you.
The world-wide binary options industry has for the past few months been plagued by one massive problem: the fact that the market with the largest size and potential, the US market, has remained off limits for most traditional binary options brokers. In the US, financial regulation is quite a bit more stringent in this respect than it is just about anywhere else, and it would be plain wrong indeed to denounce these regulations as overreaching and uncalled for.
The CFTC (Commodity Futures Trading Commission) has made it clear that the US market would never allow the emergence of the binary options trading model currently in use elsewhere in the world, as it sees a fundamental conflict of interest between the retail trader and the trading platform provider (broker) who is also the exclusive market maker in the arrangement.
This situation has had two important consequences for binary options traders in the United States. If you wanted to be safe, you had to work with the NADEX Exchange, the first US-regulated exchange offering binary options trading. The problem is that trading binary options through NADEX is quite different, and for some traders, much less convenient than trading on traditional binary options brokers. Also, NADEX is not available with any of the popular binary options auto traders. Traders who wanted to sign up with traditional binary options brokers had to work with unregulated brokers who often ended up being scam binary options brokers.
What does all this have to do with this Cantor Exchange review? Everything. Cantor Exchange is often hailed as the gateway into the US binary option markets for EU-based companies, or rather for those currently under CySEC regulation, who do business according to the above described model. It is far more than that though. The solution it offers, which essentially compels these CySEC brokers and platform-providers to conform with US laws, and thus to eliminate the conflict of interest which all too often leads to abuse, is a viable model for the future, one that the entire industry could and probably should adopt at some point.
What Exactly Is Cantor Exchange?
Before we proceed with this Cantor Exchange review, we need to clarify exactly what we’re dealing with here. We have seen Cantor Exchange reviews in which the operation was called a “broker,” and that, it definitely isn’t. Cantor Exchange is a binary options exchange, geared towards drawing platform providers as well as retail binary option traders into a regulated and fair trading environment, overseen by the CFTC, which features no exclusive market makers whatsoever, and offers all participants direct access to pricing. In other words, the business model of Cantor Exchange is a “pure exchange” model.
We can also say that through Cantor Exchange, participants trade with other participants and not with brokers, the way they do with CySEC regulated operators. It’s obvious from the start that this model doesn’t even compare to the CySEC one fairness-wise, and as such, its world-wide adoption by the trading masses should theoretically not pose a problem.
A Look At The Brief History Of Cantor Exchange
Established in 2010 – some 6 years before the inception of this Cantor Exchange review – CX is not a newcomer to the US binary options market, nor is it a trail blazer. The first company to ever build up this business model – albeit in a slightly different form – was NADEX (North American Derivatives Exchange), also under the CFTC’s regulatory umbrella.
NADEX had a head start, and in several ways, their offer differs from what Cantor Exchange bring to the table (we’ll take a closer look at those differences below), as does their core business model. Despite that though, the outlook for liquidity-growth is more promising for CX. While NADEX are focused on bringing retail binary option traders into the fold, Cantor Exchange are looking to have platform providers set up shop, bringing with them their own traders. One may as well say that CX takes NADEX’s business model to a higher and more refined level.
Regulated by the CFTC, CX is currently based in New York. It is the subsidiary of Cantor Fitzgerald LP, and its financial processing is handled by Cantor Clearing House. The operation consists of several branches like Cantor Exchange FX and Metals and Cantor Exchange Weather, as well as CX Markets, which is an educational resource for traders.
Cantor Exchange And Its Partnership With EU Technology Providers
As said at the beginning of this Cantor Exchange review, one of CX’s unique selling points and innovations resides in the fact that besides offering retail traders access to a fair, regulated and fully transparent trading and pricing environment, they focus a great deal on getting top technology providers to join their platform too. This option has been conceived as a viable and attractive sort of transition for already established CySEC operators, to the new US trading system, introduced and supported by NADEX and CX.
For EU platform providers, like SpotOption, Techfinancials and Tradologic, the goal is to create white-label platforms which can then be sold for rebranding. Every one of the brokers created this way, will retain full independence, as well as access to the same pricing. It is hoped of course, that this way, the technology providers will bring along their own traders, boosting CX’s liquidity. Because the exclusive market maker-less business model is extremely sensitive to liquidity-variance, this solution is also meant to address the inevitable teething problems of the exchange.
Making the leap from their current CySEC-regulated systems to the one required by CX was by no means a simple move for the technology providers. Techfinancials, for instance, took more than 6 months to reach full integration, and to actually pass the certification process. While not much is known about the costs involved, they were probably massive. In order to alleviate some of the pains of this transition, CX don’t even require all brokers who have access to the platform to have US certification. Only those soliciting US customers have to go through the certification process. This way, the transition can be undertaken as a two-step process.
The SpotOption Episode
The first EU technology provider to brave the waves of US regulation through CX, was SpotOption. The SpotOption CX platform retained the attractive interface and intuitive nature of its CySEC ancestry, and though plagued by liquidity-issues and limited asset selection (it only offered 5 tradable currency-pairs), it turned out to be a success and a testimony to the fact that the transition process could indeed be successfully completed. The SpotOption platform also featured slippage control and superb returns on some of its options, but it could apparently never overcome its liquidity issues, and in March 2016, representatives of the platform provider announced that they would withdraw from the CX partnership, effective August, 2016.
In their Termination of the Vendor Connectivity Agreement, SpotOption chose to remain tight-lipped in regards to the causes that led to the divorce, leaving the public to speculate whether the move means the complete abandonment of the platform provider’s US ambitions, or a simple realigning of its priorities.
Differences Between CX And NADEX
No Cantor Exchange review would be complete without a thorough look at the differences between CX and its predecessor/competitor, NADEX. Though similar at first glance, the business models of the two exchanges are different at their core. While CX opted for the exclusive market maker-less approach, IG Group (the corporate entity behind NADEX) appointed two market makers, providing pricing on all major assets.
One of these market makers is MRM, and it belongs to IG, so this is where things turn a bit weird. Also, MRM is the one that handles the majority of the market making. The presence of the other market maker is almost nominal. MRM’s profits have never really been made public, so the transparency of the business model is less than ideal.
This way, NADEX never encountered many of CX’s woes related to liquidity, inconsistent trading volumes and similarly inconsistent asset pricing. NADEX always have level trading volumes, as well as immediate fills.
The reason why CX has these problems is that they are dependent on their traders for pricing, an issue that could obviously be solved by proper liquidity. In this respect, Cantor Exchange works similarly to how US Futures Exchanges do.
Unlike CX, NADEX do their own marketing, and the traders they sign up become their customers. On CX, platform providers and individual brands come and go as they please, retaining their own customer base.
Another difference between the two exchanges (beyond the differences in settlement costs, inactivity fees, trading volumes, website traffic and other such purely mathematical factors) is in the volume of educational material offered. Geared towards the retail trader, NADEX have scores of videos, strategy guides, regular webcasts and a YouTube channel, not to mention a demo account. Cantor Exchange are working on their educational offer as well, but they’re still playing catch-up in this respect.
Cantor Exchange Features, Participation
This is without a doubt the most important part of this Cantor Exchange review for those who want to become actual participants in the exchange. Becoming a participant (note that CX do not call their traders “clients” or “customers”) is a simple and quick process. The site (cantorexchange.com), deals with US and non-US participants separately, since the sign-up steps are different for the two categories of traders. US-based participants have to fill out a simple registration form, with their names, emails, addresses and phone numbers. They can open separate accounts with Forex/Metals and Weather Protection, using the same registration and login data.
Non-US participants on the other hand, need to download a participation application packet, after which they have to print out and fill out the documents, scan them back in and email them to the Cantor Exchange customer service. Note that documents such as IDs, utility bills and bank account statements have to be provided.
In each registration section, there’s a separate path for institutional applicants.
We’ve reached the point of this Cantor Exchange review where we have to face the music: due to the above described liquidity issues, the exchange only features a handful of currency pairs and gold. More precisely, we’re talking about the AUD/USD, EUR/JPY, EUR/USD, GBP/JPY, GBP/USD and the USD/JPY pairs. This explains why the operation is caught in a bit of a catch-22 right now, as the few tradable assets draw few traders, who make pricing shaky. Silver will apparently be added soon too. Weather-wise, Atlantic Named Storm Landfalls can be traded.
The expiries for the binary option contracts span a rather impressive range. They start at 5 minutes and go all the way up to End of the Day. There are End of the Hour expiries as well as 20 minute ones. There’s no trace of 30-60 second options though, which is probably another plus.
As far as the expiry on weather trades is concerned: such trades usually expire when one of the names storms makes a landfall, or at the end of the Atlantic storm season, on November 30, 2016.
Cantor Exchange Trading Interfaces
After SpotOption exited the CX partnership, the operation lost one of its most attractive trading interfaces, but there are plenty of functional solutions left. The weather market trading is done through a TradeWx web-platform. The Forex and metal markets are traded through a Tradologic web-based platform, a series of iPad and iPhone apps as well as a number of Android apps. Techfinancials will apparently join the lineup with their own web-trader, later in 2016.
At CX, traders are free to choose the dollar amount they wish to invest on their binary options. Positions are settled at $1 per contract.
Promotions make up the most interesting part of binary option broker reviews, and this Cantor Exchange review is no exception.
Participants who use an API connection for their trading exclusively, are eligible to receive a rebate based on the volumes they generate. Such an API is the Cantor Direct system, through which traders can earn $0.20 per every 100 round turns. The rebates are paid on a monthly basis. The rebate system does not work with the weather market, even if trading there is done through the Cantor Direct API.
Another way to earn extra dollars with CX is through their referral program. CX traders who refer other participants, are rewarded in direct proportion with the trading volumes generated by the traders they refer. More precisely, referrers will pick up $1 for every 100 round turns generated by their referred, in case the latter are using the Cantor Direct connection through the API interface. The same feat is worth only $0.75, if the connection is made through the ISV interface.
Cantor Exchange Education
The education system offered is one of the highlights of this Cantor Exchange review. They have actually set up a different website for it, cxmarkets.com, where they cover all the questions and problems traders may have in relation to their trading tools, trading interfaces and promotions. Given the nature of the exchange, they actually run step-by-step tutorials explaining the whole trading process from pricing to launching a contract. Though all the information contained in this section is indeed useful, it’s all on the slim side, especially when compared to what NADEX deliver in this respect.
Cantor Exchange Withdrawals
Currently, there are only two supported withdrawal methods at CX: ACH (Automated Clearing House) and Wire transfers.
Though in several regards, CX still seem to lag behind NADEX, they are a good trading destination. The bottom line that we’re drawing at the end of this Cantor Exchange review is that CX is much more reliable and trustworthy than any of the CySEC operators out there. It is a unique trading environment, despite some similarities with NADEX, and it is compliant with all the US laws and regulations. With no exclusive market maker in the CX equation, there is no conflict of interest and traders do indeed trade with other exchange participants, rather than with “the house”. For US binary traders it is natural fit. For others around the world, it is highly recommended as well.
For now Cantor Exchange seems to offer a US-regulated binary options service which is as close as it gets to what you would get with a traditional binary options broker.
Looking forward to received feedback from my subscribers regarding trading with Cantor Exchange. I’m not in the US at the present, so I won’t be able to try it personally.
Cantor Exchange Review Summary/NADEX Comparison Chart
|Cantor Exchange (CX)||NADEX|
|Tradable assets||6 FX pairs, Gold, Weather events||4 Stocks, 4 Indices, 7 commodities, 10 FX pairs, Bitcoin, 3 Events|
|Expiry times||5 min, 20 min, End of hour, End of day, Custom||5 min, 20 min, 2 hrs, Daily, Weekly|
|API cost||Free||$500 one-time connection, can be earned back through rebates|
|Bid/Offer spread||12-16 points (varies)||6-9 points|
|Inactivity fees||$2/month after a period of inactivity of 60 days||None|
|Educational material||Tutorials, videos, how to, etc||Huge video library, trading guides, tutorials, YouTube channel|