HedgeStreet

HedgeStreet is the original name of North American Derivatives Exchange (Nadex), an internet-based, government-regulated market that allows traders to perform hedging activities or speculate on specific economic events. HedgeStreet launched in 2004 and ceased operations in 2007. IG Group plc. purchased, restructured and relaunched HedgeStreet as Nadex in 2009. Binaries and futures contracts are provided on different markets including commodities, currencies, employment, inflation and other economic indicators on Nadex.

HedgeStreet was developed to give the average investor the ability to profit from the outcomes of certain economic events through the derivatives market, and benefited small investors by having small contract sizes at low prices. HedgeStreet was regulated by the Commodity Futures Trading Commission. In 2007, UK-based IG Group plc began the process of acquiring HedgeStreet, and reopened the platform as North American Derivatives Exchange, or Nadex, in 2009.

The minimum required to open an account with Nadex is $250 and there is no membership fee. Investors pay fees to open and close trades. All trades are backed by cash so there are no margin calls and investors can’t use leverage. Nadex does not engage in any trades and holds all member funds in U.S. banks.

The development and commercialization of the internet allowed individual investors to buy financial instruments directly, without having to go through a broker or pay broker fees, and this opened up investing to a new segment of investors. By the mid-1990s, several different companies had formed to allow investors to buy and trade stocks and other direct assets on the internet without having to go through a broker. The success of these companies led HedgeStreet founder John Nafeh to see that there was a need for a similar internet platform to allow investors to buy and trade directly into the derivatives market.

Derivatives had been an institutional product, primarily because individual investors often didn’t understand them, but also because the entry cost to invest was higher than the cost to invest in direct assets. Nafeh saw the opportunity to open a retail platform for individual investors to enter the derivatives market, which was valued at $285 trillion in 2005. He created futures that cost between $10 and $50 per product and required all trades to be done with cash, so investors couldn’t lose more than they invested. The minimum amount required to open an account was $100. HedgeStreet opened in October of 2004, and in 2005, users of the platform traded almost 1 million futures contracts.