US brokers for Australians

[mjim]

Hello
It seems Nadex ( a CFTC regulated "exchange" offering Spread trading and binary options) has now started accepting Australian clients!
Had few questions and wondering if any other on Forum can help
1) It has a word Exchange in it's name but not sure it is really a true Exchange? or just in name reason for this question = The market maker seems to be it's owner! so conflict of interest?
It sounds like any major FCM in US starts calling itself a "Exchange" by matching buyers and sellers!

2) The Spread product can be constructed using true exchange traded Vanila options so why use Nadex? only for it's short expiry!

On the subject of Australian clients by US brokerage few more questions
- IB has made it more and more difficult for Australian? why? can;t they sort out the issues with ASIC IB is so big I am sure they can get a full ASIC licence in no time
- "Think or Swim" another popular broker still does not accept Australian client! why again!

 

[minwa]

Hello
It seems Nadex ( a CFTC regulated "exchange" offering Spread trading and binary options) has now started accepting Australian clients!
Had few questions and wondering if any other on Forum can help
1) It has a word Exchange in it's name but not sure it is really a true Exchange? or just in name reason for this question = The market maker seems to be it's owner! so conflict of interest?
It sounds like any major FCM in US starts calling itself a "Exchange" by matching buyers and sellers!

2) The Spread product can be constructed using true exchange traded Vanila options so why use Nadex? only for it's short expiry!

On the subject of Australian clients by US brokerage few more questions
- IB has made it more and more difficult for Australian? why? can;t they sort out the issues with ASIC IB is so big I am sure they can get a full ASIC licence in no time
- "Think or Swim" another popular broker still does not accept Australian client! why again!

Nadex is a private company (HedgeStreet). Parent company is IG, who are the market makers.

IB has not made it more difficult. ASIC has made it more difficult. Think or swim pulled out of Aus because of - ASIC. The problem here is ASIC. My own conspiracy theory is local brokers doing behind the door deals/favors "ass kissing" ASIC to harass these US brokers because they are too competitive and take too much business out of the overpriced Aussie brokers. $55 for an option trade is a common local rate.

 

[mjim]

Nadex is a private company (HedgeStreet). Parent company is IG, who are the market makers.


IB has not made it more difficult. ASIC has made it more difficult. Think or swim pulled out of Aus because of - ASIC. The problem here is ASIC. My own conspiracy theory is local brokers doing behind the door deals/favors "ass kissing" ASIC to harass these US brokers because they are too competitive and take too much business out of the overpriced Aussie brokers. $55 for an option trade is a common local rate.

Yes that is what I suspected about Nadex but boast that they are a True Exchange!

IB: How ASIC is a problem? when other US based broker like Options express has a presence here and offer all products!
IF local brokers and ASIC was against overseas brokers then OE could not get afoot hold

IB does have presence it is not as if they do not know what ASIC restrictions are that means they have gone through ASIC scrutiny , but all of a sudden they put restrictions on FX transfers! + NO margin A/c.. why?
And IB is so big that surely they can satisfy whatever security / regulatory restrictions that ASIC puts in!
To me it sounds like either they don;t care about AUS business or they have a head in sand attitude!

Further Text from ASIC
"IB has been aware, since October 2013, that ASIC believes its financial services business in Australia involves making a market in foreign exchange (FX) products. In December 2013 ASIC extended a no-action position to IB regarding its FX business on the basis IB would obtain an Australian financial services licence with a market making authorization for its FX business for an Australian subsidiary. SO HOW DIFFICULT IT IS FOR IB TO GET SUCH A PERMISSION WHEN OTHER OTC BUSINESSES LIKE OANDA/ FXCM HAVE BEEN IN AUSTRALIA

 

[hamli]

With IB on individual account you can still trade:
1. Futures/Options on Futures
2. Option Spreads with European Settlement - primarily indices (i.e SPX, NDX, RUT).

And correct, margin is not available on equity spreads with american style settlement or naked options etc (so you can't do call spreads/naked calls on equity options).

The only thing I would do before trading with Nadex is find out who the counter party is and see if NBBO is in place.

I don't know how big and safe the company is, so I'd be careful with the amount of money I leave with them.

Trading commissions are good - a step in the right direction.

Having said that, a trust/company set up is good to reduce tax for profitable investors with larger accounts, and because of such a set-up, getting access to margin as a trust/company is not an issue, and personally, I'd rather have my $$ with a large/safer company.

But sure, if you are starting out with tiny capital, NADEX appears to be worthwhile investigating.

 

[mjim]

Hi Hamli
The problem with Ndex is
1) they don't disclose who the counterpart is! just like an FX broker the counterparty could be a large instiutation, Nadex own parent company or another trader!
One could argue that would be the same with CME/ CBOT but the thing is the major instruments on these what I call true exchanges are so popular that you don't perhaps need a Market Maker there are plenty of traders on both sides most of the time.
Reason I am asking these questions is I want to avoid trading with anything that "looks and smells like a Market maker OTC.. because I think it is akin to trading with a bookmaker!

I guess one good part about Nadex is they are at least regulated by CFTC instead of the hundreds of copy cat so called EU regulated ( based in Malta/ Cyprus) Binary options brokers
2) When you mention NBBO that feature is relevant only when there are multiple exchanges correct? like in US stock trading,
3) Transparency of prices, if you compare this to DMA type CFDs where one can see the "true" price of the underlying
for most of the "markets" on Nadex there is no way to find that as spreads expiring in 1/2 hrs do not exist on major exchange, min duration of a spread ( option to option) is 1 week using weekly options

i am just wondering if there are traders from AUS who have experienced this?

 

[hamli]

In that case I retract my comments from earlier - I wouldn't personally use Nadex. The cheap commission rate is irrelevant as you get hit with it via bid/ask spread - if you are saying its like a typical fx broker/cfd broker. Can't comment further.

 

[mjim]

In that case I retract my comments from earlier - I wouldn't personally use Nadex. The cheap commission rate is irrelevant as you get hit with it via bid/ask spread - if you are saying its like a typical fx broker/cfd broker. Can't comment further.

Not only "The cheap commission rate is irrelevant" they are not cheap either
For example to make apples to apples compare ( no pun intended) one must equate the size $ to $
1ES on CME = 10 Nadex ES
ES cost = 1:16 + 0.85( IB) One way = 2:01
RT = $4:02

Nadex = 10x0.9 = $9
RT = $18
IF I am wrong in the CME Ndex ratio and say it is 1:5
Nadex = 5x0.9 = 4:50
RT = $9


Please correct me if I am wrong!