Five Minutes with Yossi Beinart

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Yossi Beinart, President of North American Derivatives Exchange (NADEX)


Yossi Beinart is the chief executive officer of the North American Derivatives Exchange (Nadex). He has been tasked with growing the exchange-traded foreign exchange and binary options markets in the United States. He sat down with MarketsWiki’s Jessica Titlebaum to tell the Nadex story, explain how illegal activity is driving their innovation and to talk about where he thinks all of it is going.

WHY Nadex Chose HedgeStreet

When Yossi Beinart set out to kick-start the binary options market in America, he saw three different paths the company could take. After deciding against building their own exchange or joining forces with an existing one, the team came up with the perfect solution: buying one.

“We bought HedgeStreet in 2008 for two reasons,” said Beinart. “The first was that it is the only exchange that accepts the public as members. The ability of any individual to be a customer of the exchange fit well with our retail customer base.”

The HedgeStreet model also offers fully collateralized contracts, which manages their exposure to risk.

“The total possible maximum loss is required to be held by the exchange for an order to be placed in the book,” Beinart explained. “For example, if you are trading a binary option and the price is 58, the long call will pay the Exchange $58 because that is the maximum loss and the seller will pay $42 because that is his maximum loss. The clearinghouse holds the money and the winner will get the full amount.”

WHAT Are Binary Options?

Binary Options are short-term contracts that only have two outcomes. The pay out is either a fixed amount of cash or zero. They are cash-settled and pay if the option ends up in the money, regardless of the amount by which the option ends up in the money.

“The good thing about binary options is that even if there isn’t much movement in the underlying market, there is still opportunity if there is volatility around the strike price,” said Beinart.

Nadex offers intraday, daily and weekly contracts on FX, commodity and stock index futures as well as contracts based on specific events.

“The most popular contracts shift from time to time but it’s mostly the Euro/Dollar FX or US 500 stock index contract,” he said. “A year and a half ago, oil was more popular but now the contract is hovering. “

Currently, and not surprisingly, Beinart also said that many people are interested in Japanese related contracts.

“We have seen a lot of activity in the Japan 225 index contracts and USD/JPY intraday options,” he said. For more information, Beinart updates his LinkedIn status weekly to reflect the most heavily traded contracts.

HOW Nadex Is Driving the Market

For the public to reach these contracts, Nadex needed to change the customer designation process.

“When we started marketing binary options contracts, we found that directly marketing to customers had a lot of advantages but it was a very long process,” he said.

To decrease the marketing process and reach a broader audience, Nadex arranged to accept brokers as customers. This allowed the Exchange to attract more customers at a faster pace but still include members of the public.

“We changed it so that FCMs could become members and act on behalf of their clients. This gave us the ability to market wholesale rather than going to one customer at a time,” he said.

WHO Are Their Competitors

The binary options market continues to grow with the Chicago Board Options Exchange’s re-launching of credit-event binary contracts in addition to it’s existing binaries on the S&P 500 (BSZ) and Volatility Index (BVZ), and the Chicago Mercantile Exchange’s weather contracts. However, Beinart does not believe these offerings pose a threat.

“We target a different audience,” he said. “I think the shortest contract at the CBOE is a monthly contract; we have intraday options. Short term contracts are more interesting anyway.”

However, Beinart is cautious of another growing business. He warns of illegal, online gambling sites that market and sell over-the-counter derivatives contracts to U.S. retail customers. Operating off the coast of Cyprus, these ‘trading firms’ take advantage of lax European Union regulations.

“Not only are these websites illegal but we have a better product offering,” said Beinart. “We are exchange-traded and have transparent markets. Our spreads are narrower and, with our products, you can place an order to get out of your contract whenever you want.”

Beinart explained how some of Nadex’ offerings provide further differentiation from the online websites.

“Our bull spread contract is fully collateralized and was designed to limit risk,” he said.


To look ahead in the FX space, Beinart looked to the past few years. He explained that the Commodity Futures Trading Commission and the National Futures Association have made significant changes, which is influencing the type of customer that can invest in the FX spot markets.

“The capital requirement increased from about $100,000 to $30 million, which wiped out 80% of the firms in FX but also protects the larger retail firms,” said Beinart. “The regulators also changed the limits on leverage tenfold. Instead of a 700 to 1 ratio, it’s now more like 50 to 1.”

Beinart said that regulators should decide if the retail FX markets will operate in over-the-counter or exchange-traded markets.

“Should the FX markets be exchange-traded?” he asked. “What’s the end game?”

Beinart doesn’t know what will happen but he knows what he wants.