IBKR’s ForecastEx Secures CFTC Approval To Launch Prediction Market


The Commodity Futures Trading Commission (CFTC) has approved ForecastEx LLC’s application to operate a contract market and derivative clearing organization.

ForecastEx, a wholly-owned subsidiary of Interactive Brokers, starts operations on Monday, July 8, 2024.

Interactive Brokers clients from eligible countries will have immediate access, the brokerage firm announced as it is the first Futures Commission Merchant to join as an exchange member.

“Markets are the most direct ways of expressing our unbiased expectations”

Thomas Peterffy, Chairman and Founder of Interactive Brokers Group, said: “ForecastEx is a prediction market that we have been working on and experimenting with for nearly 10 years. Planning for the future is the ultimate task for any business leader, government official or individual. For those plans to work according to expectations, they must fit into unfolding conditions resulting from all our actions.

“The more perfect information we have about the state of the world, the more perfectly we can plan and coordinate our actions. Markets are the most direct ways of expressing our unbiased expectations, and market prices tell us the prevailing consensus. We may adjust our plans based on consensus forecasts or express our disagreement to earn a profit or hedge our exposures.”

ForecastEx contracts are ideal for establishing the consensus view on controversial issues and hedging economic exposure. The announcement explains how contracts listed on the platform are simple and intuitive:

  • “Suppose an investor believes an event will occur, such as an increase in the US Consumer Price Index above a specific value.
  • In that case, they can buy a “yes” contract. Conversely, if they think the event will not happen, they can purchase a “no” contract.
  • Contract purchase prices range from $0.02 and $0.99. The value of these contracts will continue to fluctuate based on market participants’ evolving judgment of probabilities, directly reflecting the collective market view of the likelihood of the event.
  • Upon the event’s resolution (e.g., the moment the US Bureau of Labor Statistics announces the CPI), the contract settles at a predefined value — $1 for a correct contract and $0 for the incorrect one.”

ForecastEx to add contracts on controversial global issues

ForecastEx contracts have weekly, monthly, quarterly, and annual durations. Interactive Brokers will pay interest at 0.5% under the prevailing Fed Funds rate on the closing market value of positions. Income interest accrues daily and is paid monthly, currently at a rate of 4.83% APR.

ForecastEx will make available contracts for the following indicators:

Economic

US Fed Funds Target Rate
US Consumer Sentiment
US Housing Starts
US Retail Sales
US Building Permits
US Consumer Price Index
US Payroll Employment
US Unemployment Rate
US Corporate Profits
US Initial Jobless Claims
US National Debt
US Real GDP

Climate

Global Temperature
US Temperature
Atmospheric Carbon Dioxide

After its initial launch, ForecastEx will expand internationally and cover additional local and controversial global issues, the firm stated.



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