IG seeks US success in retail FX

On April 1, the Commodities and Futures Trading Committee (CFTC) cleared the way for local brokers to offer clients products traded on IG Group’s Chicago-based North American Derivatives Exchange (Nadex). Retail forex and futures brokers are now able to offer the exchange’s product line of binary and spread contracts.

But analysts say the exchange’s success will be dependent on IG attracting major US brokers. Isabel Green, an analyst at UBS in London said: “Success in the US is likely to take some time, as the product knowledge and broker relationships slowly pick up pace.” According to UBS, early interest is from smaller brokers, and it expects underlying retail client numbers to be 10,000–20,000 in the first 18 months.

Yossi Beinart, chief executive at Nadex in Chicago, declined to quantify the size of the potential market in dollar terms, but said the initiative is a big change for the company. “It is an exciting opportunity for the exchange to target a potentially large market, and tens of thousands of new clients,” he said.

The news comes as retail foreign exchange brokers await results of a consultation conducted by the CFTC that could cap leverage for retail forex traders at 10:1 rather than the current 100:1 (FX Week, January 15 and March 1). No date has been set for a decision.

Beinart noted the push from regulators to force over-the-counter markets on exchange is something that will help it attract retail brokers. “Margins are not an issue, as Nadex contracts are fully paid up front,” he added.

Albert Maasland, head of London operations at rival Saxo Bank, said IG’s new exchange is an interesting way to broaden the market. “It potentially could create a new stream of FX trading,” he said.