Interactive Brokers Group has officially announced the launch of ForecastEx LLC, a subsidiary regulated by the Commodity Futures Trading Commission (CFTC).

Beginning August 1, 2024, Interactive Brokers' clients from eligible countries can now trade forecast contracts on economic data and climate indicators through ForecastEx. This new trading opportunity is designed to provide investors with innovative tools to hedge or capitalize on the outcome of key economic and climate events.

Forecast contracts offer a unique trading mechanism that allows investors to express their views or hedge their portfolios against potential volatility stemming from economic indicators or climate models. These contracts are particularly relevant for investors with exposure to cyclical sectors such as industrials, consumer discretionary and real estate that are sensitive to economic fluctuations.

Thomas Peterffy, founder and chairman of Interactive Brokers, emphasized the importance of adapting to emerging trends, stating, "Companies and investors should continually reassess their expectations to try to determine whether their investment and business strategies are optimally aligned with evolving economic, demographic and climate trends. ForecastEx markets will reflect market participants' consensus probabilities that certain levels of future economic or climate action will fall within certain ranges."

Investors can participate by purchasing "yes" or "no" contracts based on their expectations of whether an event, such as the U.S. Consumer Price Index (CPI) exceeding a certain value, will occur. These contracts are priced between $0.02 and $0.99, and their value fluctuates depending on the market's collective judgment of the likelihood of the event. Once an event is resolved, contracts are set at $1 for correct forecasts and $0 for incorrect forecasts.

ForecastEx initially offers contracts on a number of economic indicators, including the U.S. federal funds target rate, U.S. consumer sentiment, U.S. retail sales and U.S. real GDP, among others. Climate contracts include indicators such as global temperature, U.S. temperature, and atmospheric carbon dioxide levels. This diverse selection provides investors with ample opportunities to trade on events with significant economic and environmental impact.

Eligible clients can trade these contracts using their existing Interactive Brokers credentials through the IBKR ForecastTrader platform. The platform is designed to be user-friendly, making it accessible to a wide range of investors. Looking ahead, ForecastEx plans to expand its presence internationally to cover additional local and global issues, provided there are reliable and impartial arbitrators to resolve events.

The new offering from Interactive Brokers marks a significant step in the evolution of financial instruments, providing investors with innovative ways to navigate market uncertainty and capitalize on emerging trends.

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