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Introducing… US election derivatives

Wednesday 21 December 2011 – by Regulation Mutters


The world of US derivatives could be set for an interesting time, after the North American Derivatives Exchange filed a notice it hopes will allow it to trade “political event contracts”.

The contracts would hinge upon the results of the 2012 US elections, Nadex said, allowing investors to hedge against a number of possible risks.

The exchange points out that if Democrats take the House of Representatives and maintain the Presidency, this would likely result in business tax increases – a risk that investors could well need to hedge against.

It even claims that political event contracts can offer a “highly accurate predictive value of election outcomes”, citing a university study that looked at more than 15 years of unregulated trading on the Iowa Electronic Market.

Bets – sorry ‘political event contracts’ – would be allowed on the presidential election and on which party gains majority control of the Senate and the House, if approved for trading.

It all sounds like a bit of a gamble to the Mutterer…

Related articles:
Isda warns on hedging impact of FTT
Finns could freeze out Portugal’s loan
Ireland cools 90% bank bonus tax talk
CFTC staff outlines deriv position limits
WFE: Continued high risks in OTC derivs

– Send your musings, rumours and links to The Mutterer at [email protected]



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