SEC Greenlights Nasdaq’s Prediction Market Options
The US Securities and Exchange Commission on Thursday approved a proposal by Nasdaq’s options trading venue to list and trade a new class of stock market prediction instruments tied to a major index, according to a regulatory order. Numerous companies are progressively looking to venture into the prediction markets arena, which enables users to wager on the results of actual events as it gains credibility and unveils new revenue opportunities and market insights. The New York-based exchange operator offers cash-settled contracts that provide a predetermined payout at expiration, contingent on whether the index concludes above or below a specified threshold.
The SEC stated that the binary options — a type of contract that provides a payout based on the result of a yes-or-no wager — would have a “fixed, all-or-nothing exercise settlement amount” of $100 if they expire in the money. Nasdaq MRX, an electronic US options exchange managed by Nasdaq, will first introduce options associated with the Nasdaq-100 and the Nasdaq-100 Micro index. The Nasdaq-100 monitors 100 of the largest non-financial firms listed on the exchange, featuring prominent names such as Apple, Nvidia, and Intel.
The micro index signifies one-hundredth of the complete value of the Nasdaq-100. The commission granted accelerated approval to Nasdaq’s request, which was submitted in March, stating that the proposal was “consistent with the requirements of the act” and did not raise new regulatory concerns. “We welcome the SEC’s approval of Nasdaq MRX’s proposal to list and trade Outcome-Related Options tied to the Nasdaq-100 Index,” a Nasdaq spokesperson stated. Cboe Global Markets, its peer, is also aiming for a launch in the second quarter for comparable “all-or-none” contracts that concentrate on financial and economic events, pending regulatory approvals.
