Nadex is actually not a broker, but an exchange. When trading on Nadex, you are trading on a real market, unlike other brokers which offer nothing but a simulation of trading. With most binary options brokers, you will be betting if the price of a certain asset will go up or down. If you win, the broker pays you. If you lose, the broker gets to keep the money you invested. But you’re not actually trading. Nadex gets a commission whenever you trade and you’re not trading against them. They merely connect you with the market so they don’t get paid when you lose. This is a great advantage. But before we get to the heart of this Nadex review, let’s go over binary options trading in the United States.
Binary Trading in the US
As part of the revolution I’m about to introduce in the world of binary options, I’ve decided to start taking a more country-specific approach. The reason is that many countries have started enforcing local rules on the trading of binary options. If once I could recommend that you sign up with an EU-regulated broker since there aren’t any good alternatives which are regulated in the USA, today things are different. The CFTC (Commodity Futures Trading Commission), which is the regulator in the USA, forbids solicitation of US-persons by foreign binary options trading companies. Here’s how they put it:
It is illegal for entities to solicit, accept offers, offer to or enter into commodity options transactions (for example, foreign currencies, metals such as gold and silver, and agricultural products such as wheat or corn) with U.S. citizens, unless those options transactions are conducted on a designated contract market, an exempt board of trade, or a bona fide foreign board of trade, or are conducted with U.S. customers who have a net worth that exceeds $5 million.
Many binary brokers have ignored this law and kept offering their services to US traders, the most known ones are MarketsWorld and Binary Mate. Recently, we’ve seen that this law has started being enforced. Banc De Binary, for example, was ordered to pay $11M as a penalty for targeting an American audience. SpotOption, the technology provider of many off-shore binary options brokers, now forbids almost all brokers that work with them to offer services in the US. Those that still do make it seem as if the traders that sign up with them are from Canada, thereby putting themselves at great risk.
Since many brokers stopped working with US traders, every once in a while I am asked by Americans to suggest a suitable broker for them. Some ask me if it’s illegal for them to sign up with off-shore brokers. The answer is that it’s NOT illegal, however it is not recommended by the CFTC:
Because of their lack of compliance with applicable laws, if you purchase binary options offered by persons or entities that are not registered with or subject to the oversight of a U.S. regulator, you may not have the full benefit of the safeguards of the federal securities and commodities laws that have been put in place to protect investors, as some safeguards and remedies are available only in the context of registered offerings. In addition, individual investors may not be able to pursue, on their own, some remedies that are available for unregistered offerings.
What this means is that if you choose to sign up with an unregulated broker and they turn out to be a scam, you won’t be able to get your money back. Unless, obviously, you travel to the country in which that company is registered, hire a lawyer and sue them.
So signing up with non-regulated brokers is allowed, but not recommended. Is there a safe alternative? Glad you asked. Let’s take a look at one of the best alternatives: Nadex. (By the way, besides Nadex, there’s another US-regulated exchange, see our Cantor Exchange Review.)
Nadex is a derivatives exchange which is subject to regulatory oversight by the CFTC. They have been around since 2007 and they are based in Chicago. They offer trading of binary options and spreads. As I already mentioned, with Nadex you will be trading directly on the exchange rather than against the broker. As I explain on my brokers page, the risk of trading against the brokers is that they may try to scam you by manipulating the results and the performance of trading software, denying withdrawal of profits and other fraudulent activities. You will never have any such issues with Nadex.
Supported assets include forex (currency pairs such as the EUR/USD, GBP/USD, etc.) commodities (including Gold, Crude Oil, Natural Gas and Corn), events (such as the nonfarm payrolls), and stock indices (such as the Wall Street 30, US 500, FTSE 100 and others.)
Expiries start at 20 minutes and are hourly, daily and weekly.
An application for Android and iPhone is available so you will be able to keep trading on the road, as long as you have an Internet connection.
Minimum deposit with Nadex is $250.
Read our Nadex Trading Guide, which thoroughly explains what is Nadex and how Nadex trading is done.