ForecastEx LLC Launches Contracts on U.S. Election Outcomes

Rhea-AI Summary

ForecastEx , a CFTC registered Designated Contract Market and Derivative Clearing Organization, has launched Forecast Contracts on upcoming U.S. election results. These contracts allow customers of ForecastEx Members to trade predictions on political outcomes, either to hedge against election-related uncertainty or profit from political insight.

Starting October 4th, 2024, at 7:15 AM CT, contracts will be available for events such as:

• Kamala Harris winning the 2024 presidential election
• Donald Trump winning the 2024 presidential election
• Democratic Party winning a majority in the U.S. Senate in 2024
• Democratic Party winning a majority in the U.S. House of Representatives in 2024

Contract prices range from $0.02 to $0.99, reflecting the market's consensus on each outcome's likelihood. Correct outcome holders receive $1.00. The payment obligation is fully secured by cash, with 100% of investment income distributed monthly to Members as an Incentive Coupon.

Positive

• Launch of new financial products allowing trading on political outcomes
• Potential for investors to hedge against election-related uncertainty
• 100% of investment income distributed to Members as Incentive Coupon
• Fully secured payment obligation for each Forecast Contract

Negative

• None.

Insights

Financial Analyst

The launch of Forecast Contracts on U.S. election outcomes by ForecastEx is an interesting development in the financial markets, but its direct impact on Interactive Brokers (IBKR) is likely to be These contracts provide a new avenue for investors to speculate on or hedge against political outcomes, which could potentially increase trading activity. However, it's unclear if IBKR will offer these contracts to its clients.

From an industry perspective, this move represents a growing trend of financialization of political events. It could attract more retail investors to political betting markets, potentially increasing overall market participation. For IBKR, if they choose to offer these contracts, it could provide a modest new revenue stream and attract politically-engaged traders to their platform.

The $0.02 to $0.99 price range for contracts makes them accessible to retail investors, aligning with IBKR's focus on serving individual traders. The monthly distribution of investment income to members as an Incentive Coupon is an attractive feature that could drive interest.

Overall, while innovative, this development is unlikely to significantly impact IBKR's financial performance or stock price in the short term. Long-term implications depend on the popularity of these contracts and IBKR's potential involvement in offering them.

CHICAGO, Oct. 3, 2024 /PRNewswire/ -- ForecastEx LLC ("ForecastEx"), a CFTC registered Designated Contract Market ("DCM") and Derivative Clearing Organization ("DCO"), today announced the launch of Forecast Contracts on upcoming election results. These contracts allow customers of ForecastEx Members to trade their predictions on political outcomes, to either hedge against election related uncertainty, or profit from political insight. The election events available for pairing starting at 7:15 AM CT tomorrow October 4th, include the following:

• Will Kamala Harris win the 2024 presidential election?
• Will Donald Trump win the 2024 presidential election?
• Will the Democratic Party win a majority in the United States Senate during the 2024 general election?
• Will the Democratic Party win a majority in the United States House of Representatives during the 2024 general election?

These contracts offer investors an easy way to take a position on key political events. For example, if an investor believes the United States Senate will be under Democrat control in 2025, they can purchase a "yes" contract. Conversely, if they believe the event will not occur, they can buy a "no" contract. Contract prices range from $0.02 to $0.99, reflecting the market's evolving consensus on the likelihood of each outcome. E.g. $0.35 corresponds to 35% probability. When the event outcome has been determined, the holder of the contract associated with the correct outcome will receive $1.00.

The payment obligation for each Forecast Contract is fully secured by cash and 100% of the income earned from its investment is distributed monthly to Members as an Incentive Coupon in proportion to the daily closing value of their positions. ForecastEx expects some Members to rebate a portion of this Incentive Coupon to their customers.

Contracts for individual candidates in state elections are expected to be added shortly. A complete list of economic, climate and election based Forecast Contracts is available on the website.

About ForecastEx:
ForecastEx is a wholly owned subsidiary of Interactive Brokers Group, Inc (Nasdaq: IBKR), whose other subsidiaries include Interactive Brokers LLC (IB LLC) and IB Global Investments LLC (IBGI LLC). IB LLC, an FCM and broker, is a ForecastEx Member approved to offer Forecast Contracts to its customers as well as eligible customers of other non-U.S. broker affiliates on whose behalf it provides execution and clearing services. IBGI LLC, an Affiliated Customer of IB LLC, will operate as a liquidity provider, maintaining Bids on both the "Yes" and the "No" of various Event Markets. Pursuant to ForecastEx Rule 405(b), IBGI LLC bids are always filled last by ForecastEx if equal in price to another customer's bid.

View original content to download multimedia:https://www.prnewswire.com/news-releases/forecastex-llc-launches-contracts-on-us-election-outcomes-302267310.html

SOURCE ForecastEx LLC

FAQ

What are the new Forecast Contracts launched by ForecastEx for the 2024 U.S. elections?

ForecastEx has launched Forecast Contracts that allow trading on outcomes of the 2024 U.S. elections, including presidential winners and party majorities in the Senate and House of Representatives.

When will ForecastEx's election outcome contracts be available for trading?

The Forecast Contracts on U.S. election outcomes will be available for trading starting October 4th, 2024, at 7:15 AM CT.

How do the pricing and payouts work for ForecastEx's election outcome contracts?

Contract prices range from $0.02 to $0.99, reflecting the market's consensus on each outcome's likelihood. Holders of contracts with the correct outcome receive $1.00.

What is the Incentive Coupon offered by ForecastEx for its election outcome contracts?

ForecastEx distributes 100% of the income earned from contract investments monthly to Members as an Incentive Coupon, proportional to the daily closing value of their positions.