Many United States-based readers mail us with questions regarding the difference between the official US binary options trading market and the binary options promoted on the Fair Binary Options website. While the differences in the way binary options themselves operate are not very big — after all, it’s the same family of financial products, the real difference lies in the regulatory framework in the US which adopts a somewhat different view on underlying assets than the rest of the world.
This legal framework determines the business model of exchanges which are opened to US customers. In this sense, NADEX operates more like a stock market. NADEX is more akin to an exchange platform that connects interested sides in the binary options trading. On the other side, regular binary options brokers act as a market makers providing liquidity to the market. The problem with markets that may no be as liquid as popular stock or bond exchanges are the high spreads and low incentives to trade. There is also a liquidity premium involved.
Apart from the design itself, the business model is also much different. NADEX earns on fees from every transaction and that from the both sides of the trade. Regular binary options brokers traders have a chance to read our reviews of the best binary brokers earn funds from their market making activity mostly acting as the other side of the transaction. By doing this they take part of the risk on themselves since, in contrast to the fees business, binary options brokers risk their own funds when entering transactions in order to support market liquidity.
The calculation of returns that includes fees and ticks, as seen on NADEX is also not as transparent as the user must make second order calculations to figure out the payout. On the other hand, binary options brokers offer an attractive system that specifies the ratio and the payout amount before the trade is executed. There are no fees or hidden costs. It is similar to the pricing of options where NADEX trims parts of the price distribution of the underlying market. Binary options prices directly form the underlying market or are set as averages in of bid/ask spread.
While NADEX offers a fine way for US citizens to enter binary options trading, it fails at delivering the truly user-friendly experience of binary options. This is why we invite all US citizens to try out FBO brokers which enable binary options trading for US citizens. When US citizens enter FairBianryOptions.com they will be presented with a list of brokers accepting US customers.