The launch of ForecastEx, a prediction exchange that focuses on economic and climate events, is delayed until later in the summer due to administrative issues, according to Steve Sanders, EVP of Marketing and Product Development at Interactive Brokers.
ForecastEx, a wholly-owned subsidiary of Interactive Brokers Group, has received the necessary designations from the Commodity Futures Trading Commission (CFTC) to operate a contract market and derivative clearing organization, and was supposed to start operations on Monday, July 8, 2024.
Sanders told Traders Magazine that ForecastEx enables clients of Interactive Brokers in eligible countries to trade forecast contracts on the probabilities associated with the future outcomes of US economic events and global climate events.
US economic events include Unemployment Claims, the Consumer Price Index, Retail Sales, Fed Funds, Housing Starts and many others, whereas Global climate events include temperatures and atmospheric CO2, he explained.
“To trade, clients simply choose YES or NO on a forecast contract,” he said.
“We have been interested in this topic for a very long time, and it is a good way to understand the consensus view on controversial issues,” Sanders added.
Thomas Peterffy, Founder and Chairman of Interactive Brokers, has been working on and experimenting with ForecastEx for nearly 10 years, Sanders said, adding: “But we’ve had other priorities.”
“We started earnestly working on it in November 2021,” he said.
Interactive Brokers is the first Futures Commission Merchant to join ForecastEx as an exchange member.
“Reinvigorating the FCM community is a big part of ForecastEx’s model and ForecastEx is actively reaching out to other FCMs to join in the effort,” Sanders said.
He said that eligible individual and institutional investor clients of Interactive Brokers LLC, Interactive Brokers Hong Kong Limited, and Interactive Brokers Singapore Pte. Ltd. can trade forecast contracts on IBKR ForecastTrader, a specialty trading platform.
Sanders believes that retail investors are sophisticated enough to invest in these type of instruments.
“Contracts listed on ForecastEx are simple and intuitive, and individual investors with knowledge of the economy could be interested in these contracts,” he said.
ForecastEx contracts for the following indicators will be immediately available:
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
ForecastEx contracts have weekly, monthly, quarterly and annual durations.
Interactive Brokers will pay interest at 0.5% under the prevailing Fed Funds rate on the closing market value of positions. Income interest accrues daily and is paid monthly, currently at a rate of 4.83% APR.
To coincide with the launch, Interactive Brokers developed a comprehensive set of free educational materials available in IBKR Campus to help global investors learn about US economic indicators, including:
IBKR Economic Landscape: Commentary, analysis, and insight on US economic indicators from Interactive Brokers’ Senior Economist José Torres.
Economic Events Calendar: Market-moving economic events from around the world that can be sorted by region and event type.
Courses on Key Economic Events: Information about economic events such as the Non-Farm Payroll Report, Consumer Price Index and FOMC Report and how these data releases can move the markets drastically in one way or another.
After its initial launch, ForecastEx plans to expand internationally and cover additional local and controversial global issues, according to Sanders.
“Contracts will be limited only by the availability of credible, impartial arbiters of event resolutions,” he said.
