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CFTC prohibits Nadex political event derivatives

The Commodity Futures Trading Commission (CFTC) today issued an order pursuant to Section 5c(c)(5)(C)(ii) of the Commodity Exchange Act and CFTC Regulation 40.11(a)(1), prohibiting the North American Derivatives Exchange (Nadex) from listing or making available for clearing or trading a set of self-certified political event derivatives contracts.

The contracts are binary option contracts that pay out based upon the results of various US federal elections to be held in 2012.

Nadex self-certified the contracts on 19 December, 2011, and on 3 January, 2012, the CFTC initiated a 90-day review period of the contracts pursuant to CFTC Regulation 40.11(c). As a result of reviewing the complete record, the CFTC determined that the contracts involve gaming and are contrary to the public interest, and cannot be listed or made available for clearing or trading. By a separate letter, the CFTC also requested that Nadex withdraw its self-certification of related rule amendments that were submitted by Nadex to enable trading of the contracts.
 


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