The U.S. Securities and Exchange Commission (SEC) has approved a proposal from the Nasdaq Options Market to list and trade a new category of equity prediction tools linked to major indices, according to a regulatory order issued on Thursday.
As prediction markets gain increasing recognition and open up new revenue streams and market insights, multiple companies are actively seeking to enter this field, which allows users to place bets on the outcomes of real-world events.
The product launched by the New York-based exchange operator is a cash-settled contract. At expiration, it pays a fixed amount based on whether the index's closing price is above or below a predetermined level.
The SEC stated that binary options—contracts that provide payouts based on a "yes" or "no" bet outcome—will have a "fixed, all-or-nothing exercise settlement amount" of $100 if they expire in-the-money.
Nasdaq MRX, the U.S. electronic options exchange operated by Nasdaq, will initially launch options products linked to the Nasdaq-100 Index and the Nasdaq-100 Micro Index.
The Nasdaq-100 Index tracks the 100 largest non-financial companies listed on the Nasdaq exchange, including Apple, Nvidia, and Intel. The Micro Index has a base value equivalent to 1/100th of the total market capitalization of the Nasdaq-100 Index.
The Commission approved Nasdaq's application for accelerated approval, which was submitted in March, stating that the proposal "complies with the requirements of the Act" and does not raise new regulatory concerns.
A Nasdaq spokesperson said, "We welcome the SEC's approval of Nasdaq MRX's proposal to list and trade outcome-related options (OROs) linked to the Nasdaq-100 Index."
Peer exchange and options giant Cboe Global Markets also plans to launch all-or-nothing contracts focused on financial and economic events in the second quarter, pending regulatory approval.
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