ForecastEx LLC, a subsidiary of Interactive Brokers Group, Inc (Nasdaq: IBKR), launched its event contract market on Thursday. This platform allows traders to hedge against or express conviction on the outcomes of key economic and — wait for it — climate events using Forecast Contracts.
Initially, ForecastEx will offer contracts on US economic indicators such as unemployment rate, Consumer Price Index (CPI), and GDP, as well as climate indicators including global temperature, US temperature, and atmospheric carbon dioxide concentration.
The Forecast Contracts operate on a unique “Yes” or “No” outcome basis, with contracts executed when the sum of bids reaches $1.01. Correct outcome holders receive $1.00 at resolution, while incorrect outcome holders receive nothing.
ForecastEx emphasizes a level playing field for all participants and employs a simple fee structure, charging only $0.01 per contract pair. The platform also distributes 100% of its income from held cash collateral to members as incentive coupons.
According to its statement, all bids are fully collateralized with cash, this way they can ensure that they have “sufficient funds to settle contracts when resolved or closed beforehand. This mitigates the credit risk participants would otherwise face.”
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