Interactive Brokers Group Inc. IBKR announced that its wholly-owned subsidiary, ForecastEx LLC, has obtained the requisite approvals from the Commodity Futures Trading Commission, to operate as a contract market and derivative clearing organization.
ForecastEx will begin its operations on Jul 8, 2024, and the clients of Interactive Brokers from eligible countries will gain immediate access to the platform. IBKR is the first Futures Commission Merchant to become a member of this exchange.
Thomas Peterffy, chairman and founder of Interactive Brokers, said, “ForecastEx is a prediction market that we have been working on and experimenting with for nearly 10 years.”
Contracts listed on ForecastEx are simple and user-friendly. For instance, if an investor anticipates an event will occur, such as a rise in the US Consumer Price Index above a specific value, they can purchase a “yes” contract. On the other hand, if they consider it unlikely to occur, they can buy a “no” contract. Contract purchase prices fall in the range of 2 cents to 99 cents. The value of these contracts will keep fluctuating depending on the evolving market sentiments. Once the event has occurred, the contract settles at $1 for the correct contract and $0 for the incorrect one.
ForecastEx contracts are well-suited to establish a consensus view on debatable issues and hedging economic risk.
These contracts will be immediately accessible for varying indicators, including 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 and US Real GDP under economic indicators. At the same time, climate indicators like Global Temperature, US Temperature and Atmospheric Carbon Dioxide are part of the contracts.
ForecastEx contracts offer weekly, monthly, quarterly and annual durations. Interactive Brokers will offer an interest rate of 0.5% below the prevailing Fed Funds rate on the closing market value of positions. Income accrues daily and is paid monthly, currently at an annual percentage rate of 4.83%.
Eligible clients of Interactive Brokers LLC, Interactive Brokers Hong Kong Limited and Interactive Brokers Singapore Pte. Ltd. can trade ForecastEx contracts via IBKR ForecastTrader. Post its initial launch, ForecastEx aims to expand globally to address further local and contentious global issues. The availability of credible and impartial arbiters of event resolutions will determine the scope of the offerings.
This move aligns with Interactive Brokers’ aim to boost its offerings and expand its global footprint. The company has undertaken several measures to achieve the same. In May 2024, the company launched crypto trading in the U.K. With this, the company expands its scope of digital asset exposure. Further, the launch of IBKR GlobalTrader enables investors globally to trade stocks through mobile applications. The company was one of the first brokers to introduce Overnight Trading on U.S. stocks and ETFs nearly 24 hours a day, five days a week. Additionally, the launch of IBKR Lite has enabled investors to trade commission-free and, thus, continue to strengthen the company’s market share.
Over the past six months, shares of the company have surged 47.9% compared with the industry’s growth of 13.3%.
Image Source: Zacks Investment Research
Interactive Brokers currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Financial Services Firms Taking Similar Steps
Earlier this week, State Street Corp.’s STT asset management business, State Street Global Advisors, announced a collaboration with Galaxy Asset Management, an affiliate of Galaxy Digital Holdings Inc., to introduce investors to the next generation of digital asset-based strategies. This will enhance investors’ exposure to digital asset space companies, extending beyond just cryptocurrencies and bitcoin.
This partnership between STT and Galaxy Digital aims to offer investors the latest innovation in digital asset investing. The combination of the proficiencies of two leading brands and first-movers will provide investors accessibility to the $2.4 trillion digital asset ecosystem via manager-directed strategies.
Similarly, BlackRock Inc. BLK entered into a strategic partnership with GeoWealth, a financial technology firm, to expand its capabilities to cater to the needs of clients in the $37 trillion U.S. wealth market. This move aligns with the company’s growth strategy to boost its offerings.
BLK aims to offer custom models via GeoWealth’s platform, enabling advisors to address client demand for private markets, direct indexing and fixed-income SMAs alongside traditional ETFs and mutual funds, all within a single account.
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