In June of 2011, Dan Cook was appointed director of business development for Nadex, a Commodity Futures Trading Commission (CFTC)-regulated, online futures exchange that is geared toward retail investors. Before taking his current position, he was chief executive officer of IG Markets, Inc. He spoke recently with JLN editor, Alan DiNovo, about how new Dodd-Frank regulations concerning the precious metal spot markets will impact retail investors.
Q: You recently became director of business development for Nadex. How has the transition been?
A: The transition has been a really good experience. Having been the CEO of IG Markets, Inc. which offered Nadex contracts, I was already familiar with the contracts and the advantages this product set offers the retail trader. With knowledge of the contracts already in place, the biggest learning curve, and one of the most interesting aspects of the role, has been to understand the actual operations of the exchange.
Q: What are some of the current responsibilities you have in your position?
A: As director of business development, I oversee our sales, customer service and marketing functions. I am also involved in the operational side of the business. One of the great benefits of being a younger company is that everyone at all levels is exposed to all aspects of the company. This fosters a great team environment in which we all share the same goals.
Q: What has been the most challenging aspect since you took your position at Nadex?
A: Prior to Nadex, I had spent the majority of my financial career working at FCMs that focused on over-the-counter products in the spot market. The biggest challenge, as well as opportunity, has been to learn the differences between how an FCM operates, versus how an exchange works from both a regulatory and operational standpoint.
Q: When did you decide you wanted to work in the financial world? Did it coincide with your goals early in life?
A: Since high school and my first economics class in which we did a semester long simulated trading exercise, I have always been fascinated by the markets. While I always had the interest, when I started my work life in the early 90s the tech boom was just starting to form and I went down that path for the next decade.
During that run (1997) I started trading equities part-time. It was during this time also that online trading was starting to really take off and I had the opportunity with my background in data services to work with some exchanges in the development of these products. Walking through the trading floors every day sealed it, and within a few years I knew that I wanted to make this my path, and not remain on the periphery.
Q: If you hadn’t gone into the financial industry, what do you think you would have done?
A: At this point, I can’t really imagine doing anything else. No matter what the career path outside of financials would have been though, with the ease of access to global markets we have these days I would still be trading in some capacity; either that or I would have been an astronaut.
Q: How will the new Dodd-Frank regulations impact the precious metals spot trading market?
A: For those of us in the U.S., my understanding is that it effectively ends it, at least how most retail traders see it.
Q: How do your services differ from others who are no longer able to operate due to the new regulations?
A: The biggest difference is that Nadex is a CFTC-regulated futures exchange. The contracts we offer are designed for the retail trader and offer a low cost of entry. Another very important difference is that all of the contracts listed on Nadex are limited risk. In the spot market, it was not uncommon to see leverage of 50-to-1 on gold. This can make the cost of entry very low, but the cost of getting out could be very high. What many retail traders find out too late is that while they can put a big position on from a margin perspective, if the market turns it can cost them more than they had in their account to begin with.
When trading on Nadex, all risk is known up front before you ever hit buy or sell, and that is the amount required to hold the position. If I am trading a Nadex contract and my maximum risk is $50, I put up $50 to secure the position and that is the most I can lose, period. I never have to worry about a margin call or turning upside down in my account. Even if there is another May 6 flash crash, I can’t lose more than what I put up for any position.
Q: How have the new Dodd-Frank regulations impacted Nadex and its services?
A: The Nadex contract offering seems to be very much in line with the with many of the aspects of this regulation. The contracts we offer are exchange-traded and as such offer the transparency and price discovery aspects the bill seems to strive for. As it relates specifically to the spot metals market, Nadex may be the one firm that has seen a big benefit from this regulation. The retail trader who can no longer trade spot metals can come to Nadex and still have exposure to gold and silver in a very similar manner to what they did before, but in an exchange-traded, limited-risk environment.
Q: How do you think the precious metals spot trading market will change in the future?
A: With the regulatory changes, I think the question would be if there is a future for retail spot trading the precious metals market.