Will Investors Bet on Economic Data? Interactive Brokers Is All In
The online brokerages launched a new platform to allow investors to invest in yes-or-no trades on upcoming events.
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Forget Super Bowl LIX — the next big bet may be on the upcoming CPI print.
Interactive Brokers is the latest company to offer trades on economic events, announcing Wednesday that it will let customers use exchange-listed contracts to take sides on yes-or-no questions regarding the US economy. So-called event contracts allow investors to essentially place wagers on economic indicators, like whether the Initial Jobless Claims report comes in above or below analysts’ estimates.
They’re quickly hitting the mainstream. There were more than 130 contracts listed for trading in 2021, which was more than in the past 15 years combined, according to a proposed rule by the Commodity Futures Trading Commission. Some contracts even included non-finance bets, like guessing Oscar winners or predicting whether a natural disaster will hit certain US cities.
Bet Your Bottom Dollar
Event contracts have been around since 2004, but the trades have been mostly off the table for the majority of the investing public. While Interactive Brokers is not the first company to offer them — Kalshi and the Chicago Mercantile Exchange are others — it is arguably the largest and most well-known, with more than 2 million customer accounts. Investors can also place trades on other factors with Interactive Brokers, like US real GDP, the national debt, global temperature, or carbon dioxide levels in the atmosphere.
- Contracts range in price from $0.02 to $0.99, and like betting odds for sporting events, the price can move higher or lower within that range.
- Once the event is over, the contract immediately settles: $1 for a correct contract, and $0 for the wrong one.
“Planning for the future is the ultimate task for any business leader,” Interactive Brokers founder Thomas Peterffy said in a release. “The more perfect information we have about the state of the world, the more perfectly we can plan and coordinate our actions.”
Snake Eyes: Unlike a casino floor, investors can’t bet on everything, meaning the events have to have an economic angle. In June, the CFTC proposed a rule that would ban trades from certain activities, including political races, award contests, and sporting events. Hey, they have to leave something for DraftKings.
