IBKR’s ForecastEx Gets CFTC Approval

ForecastEx LLC, a subsidiary of Interactive Brokers, has received approval from the Commodity Futures Trading Commission (CFTC) to operate as a contract market and derivative clearing organisation. ForecastEx will commence operations on Monday, July 8, 2024. Interactive Brokers clients from eligible countries will have immediate access, making Interactive Brokers the first Futures Commission Merchant to join as an exchange member.

About the CFTC Approval 

ForecastEx LLC, a subsidiary of Interactive Brokers, has been approved by the Commodity Futures Trading Commission (CFTC) to operate as a contract market and derivative clearing organisation. Starting operations on July 8, 2024, ForecastEx will offer Interactive Brokers clients from eligible countries immediate access to its prediction market platform.

ForecastEx has been developing for nearly a decade. It aims to enhance future planning through market-based consensus predictions. The platform will feature simple and intuitive contracts, allowing users to bet on the outcomes of various events, such as economic indicators and climate variables. 

If an investor believes an event will occur, such as a rise in the US Consumer Price Index above a specified level, they can purchase a “yes” contract. Conversely, if they think the event will not happen, they can buy a “no” contract. The prices of these contracts range from $0.02 to $0.99. Contracts will settle at $1 for correct predictions and $0 for incorrect ones.

ForecastEx will initially cover a range of economic and climate indicators, with plans to expand internationally and include more controversial global issues post-launch. Interactive Brokers will offer interest payments on the closing market value of positions, ensuring a seamless and beneficial experience for users.

The contracts offered by ForecastEx include the following:

EconomicUS 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
ClimateGlobal Temperature
US Temperature
Atmospheric Carbon Dioxide

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What Does It Mean?

Here is what it means for users. 

New Trading Opportunities

ForecastEx opens a new avenue for traders to speculate on various economic and climate indicators. This can particularly appeal to traders looking to diversify their portfolios with innovative trading instruments.

Hedging Economic Exposure

The platform offers a unique method for hedging against economic risks. By participating in prediction markets, traders can protect their portfolios from unexpected economic events and market volatility.

Potential for Profit

With the ability to buy ‘yes’ or ‘no’ contracts based on event predictions, traders can profit from their insights and market judgments. Correct predictions settle at $1 per contract, while incorrect ones settle at $0, providing clear and straightforward outcomes.

Interest on Positions

Interactive Brokers will pay interest at 0.5% below the prevailing Fed Funds rate on the closing market value of positions. This additional income can enhance overall returns for traders holding positions on ForecastEx.

Diversified Contract Durations

Traders can choose from various contract durations for flexibility in trading strategies and to plan for market movements.

Expanding Horizons

As ForecastEx expands internationally, traders will have more markets to participate in, offering further opportunities for profit and hedging.

About ForecastEx LLC

ForecastEx LLC is a subsidiary of Interactive Brokers. ForecastEx aims to expand globally, addressing local and global subjects to enhance the platform’s usability and provide a comprehensive perspective of market expectations across various issues. The company, as a prediction market, has been in development and testing for over a decade and will finally start operating in July 2024.

Way Ahead

ForecastEx’s launch marks a significant advancement in the prediction market space, providing traders with innovative tools and opportunities. As the platform expands globally, it is poised to become a vital resource for hedging, speculation, and market insights.

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