ForecastEx, LLC

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ForecastEx, LLC
ForecastExLogo250px.png
Founded 2021
Headquarters Chicago
Website forecastex.com

ForecastEx was organized as a designated contract market (DCM) and derivatives clearing organization (DCO) and was approved by the U.S. Commodity Futures Trading Commission (CFTC) to operate as a DCM and DCO on June 24, 2024. It operates as a Delaware limited liability company and is a wholly owned subsidiary of IBG LLC, aka Interactive Brokers.[1][2]

The exchange offers event contracts it calls forecasts, based on on economic, business, environmental, legislative, or social events. The contracts listed on ForecastEx are event positions. Each event market features a "Yes" event position and a "No" event position for the same event question. There are no sell orders on ForecastEx, only bids for Yes or No event positions. Once the total amount of the Yes and No bids equals to $1.01, then the event is sent to clearing, and only then is a contract formed. All contracts are fully collateralized with the clearinghouse and pay out $1.00 per contract to the Yes or No position at the event resolution.[3]

Interactive Brokers had planned to launch ForecastEx on July 8, 2024, but the launch was delayed until later in the summer due to what the company said were “administrative issues.” [4]

Structure and Governance[edit]

ForecastEx is governed by an operating agreement and a set of rules known as the ForecastEx Rules. The company is overseen by a board of directors, with more than 35% of the board members required to be public directors. The board reviews the performance of its members at least annually.[5]

The organization maintains several standing committees, including:

  • Regulatory Oversight Committee
  • Clearing Committee
  • Event Review Committee

Membership and Clearing[edit]

ForecastEx provides access privileges, clearing privileges, and related services to its clearing members. To become a clearing member, an applicant must meet several criteria, including:

  • Being registered as a Futures Commission Merchant (FCM) with the CFTC
  • Satisfying minimum clearing fund requirements
  • Meeting other criteria as requested by ForecastEx

Clearing members can sponsor other FCMs, known as Sponsored FCMs, to submit bids for clearing. The clearing members are responsible for the activities of their sponsored FCMs.[6]

Trading and Bid Types[edit]

Market participants on ForecastEx can submit various types of bids, including limit bids. Bids are generally prioritized based on price-time priority, with an exception for affiliated customers whose bids are filled last at every price level.

Position Limits and Emergency Powers[edit]

ForecastEx implements position accountability measures for all event positions. Participants opening more than 250,000 event positions in any one event question agree to provide information about their positions upon request.

In emergency situations, ForecastEx's CEO or a designated individual has the power to implement temporary emergency rules. These powers include the ability to suspend trading, modify position limits, and alter the resolution time of event markets.

Clearing and Settlement[edit]

ForecastEx operates a clearinghouse that confirms and clears trades. Event positions are created when the $1.01 threshold is reached, and the clearinghouse confirms that clearing members have sufficient collateral. At an event contract's resolution time, holders of the correct position receive a settlement value of $1.00 per contract, while holders of the incorrect position receive $0.00.

Clearing Fund[edit]

ForecastEx maintains a clearing fund to which each clearing member contributes. The minimum size of the fund is $1,000,000 per clearing member. The clearinghouse has the authority to increase the size of the clearing fund as needed to protect the clearinghouse, clearing members, or the general public.

ForecastEx's unique structure and rules allow it to operate as a specialized futures exchange, focusing on event-based contracts and utilizing a novel approach to market making and settlement within the regulatory framework of the CFTC.

History[edit]

Products and Services[edit]

  1. US Initial Jobless Claims: Filed by unemployed individuals for UI eligibility; weekly, Thursdays at 7:30 AM.
  2. US Unemployment Rate: Percentage of unemployed in the labor force; monthly, first Friday at 7:30 AM.
  3. US Retail Sales Monthly: Total sales of retail trade establishments; monthly, around the 15th at 6:30 AM.
  4. US Building Permits: Approvals for construction; monthly, around the 16th at 6:00 AM.
  5. US Payroll Employment: Number of nonfarm workers; monthly, first Friday at 7:30 AM.
  6. 3US Consumer Price Index: Average price change for urban consumers; monthly, around the 12th at 7:30 AM.
  7. US Consumer Sentiment: Survey-based consumer sentiment index; monthly, around the 15th at 9:00 AM.
  8. US Fed Funds Target Rate: Interest rate set by FOMC; eight times yearly at 1:00 PM.
  9. US Housing Starts: New privately-owned housing units started; monthly, around the 12th at 7:30 AM.
  10. US Real GDP: Value of final goods and services; quarterly, about two months post-quarter at 7:30 AM.
  11. US Corporate Profits: Income earned by U.S. corporations; quarterly, about two months post-quarter at 7:30 AM.
  12. US National Debt: Types and holders of U.S. debt; yearly on October 1.
  13. Global Temperature: Trends from sea and land surface temperature data; yearly in January.
  14. US Temperature: U.S. average temperature from nClimDiv dataset; yearly in January.
  15. Atmospheric Carbon Dioxide: CO2 concentration measured by Global Monitoring Laboratory.

Key People[edit]

References[edit]