IBKR’s ForecastEx Secures CFTC Approval to Launch Prediction Market

The Commodity Futures Trading Commission (CFTC) has granted approval for ForecastEx LLC to operate as a contract market and derivative clearing organization.

ForecastEx, a fully-owned subsidiary of Interactive Brokers, will commence operations on Monday, July 8, 2024.

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

Expressing Unbiased Expectations Through Markets

Thomas Peterffy, Chairman and Founder of Interactive Brokers Group, commented on the launch: “ForecastEx is a prediction market we have been developing for nearly 10 years. Planning for the future is crucial for any business leader, government official, or individual. Accurate information about the state of the world allows us to plan and coordinate our actions more effectively. Markets provide direct expressions of our unbiased expectations, with market prices reflecting the prevailing consensus. We can adjust our plans based on these forecasts or act on our disagreements to earn profits or hedge our exposures.”

Simple and Intuitive Contracts on ForecastEx

ForecastEx contracts are designed to establish consensus views on various issues and hedge economic exposure. The platform offers simple and intuitive contract listings:

For example, if an investor believes the US Consumer Price Index (CPI) will rise above a specific value, they can buy a “yes” contract. Conversely, if they think the event will not happen, they can purchase a “no” contract. Contract prices range from $0.02 to $0.99, fluctuating based on market participants’ judgments of probabilities. Upon event resolution (e.g., the US Bureau of Labor Statistics announcing the CPI), the contract settles at $1 for a correct contract and $0 for an incorrect one.

Expansion to Global Issues

ForecastEx contracts are available with weekly, monthly, quarterly, and annual durations. Interactive Brokers will pay interest at 0.5% below the prevailing Fed Funds rate on the closing market value of positions, with income interest accruing daily and paid monthly, currently at a rate of 4.83% APR.

Available Contracts

ForecastEx will initially offer 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

Following its initial launch, ForecastEx plans to expand internationally and include additional local and controversial global issues.