Cboe Global Markets has received approval from the US Securities and Exchange Commission (SEC) to list event contracts based on corporate key performance indicators (KPIs).
The exchange operator first proposed the derivatives in July. According to its original filing, there could be 100 contracts linked to the KPIs of 23 publicly traded companies, including Apple, Google parent Alphabet, Amazon, Coinbase Global, Ford, Intel, Microsoft, Nvidia, Palantir, Robinhood, SpaceX and Tesla.
Robinhood targets earnings season
The contracts will debut on Robinhood Markets. The company expects to offer them during the third-quarter earnings season, but trading cannot begin until the clearinghouse registration receives final approval.
The contracts will give traders a direct way to speculate on specific company milestones without the need to buy or short the underlying stock. Examples include Nvidia’s edge computing revenue, Coinbase’s transaction volume and Tesla’s quarterly vehicle deliveries.
The product combines Cboe’s institutional infrastructure with the retail interest of Robinhood’s core audience, which has increasingly engaged with event contracts.
Sports derivatives remain the most popular offerings on yes/no exchanges, while the KPI contracts could find an audience among traders who seek something new to bet on.
According to the SEC, the Cboe contracts on Robinhood will be subject to standard securities laws, which include margin requirements, customer account rules, auction mechanisms and quoting obligations.
No ruling on existing prediction markets
Prediction markets already list a range of event contracts on public companies and even some privately held corporations. The SEC made clear, however, that its order covers only the Cboe derivatives and not contracts currently available.
“The order does not address what may be similar products with the same underlying KPIs as the binary options described in the order structured in different ways,” SEC Chairman Paul Atkins said in a statement.
“The SEC’s approval order today does not address—and does not foreclose—CFTC jurisdiction over KPI contracts based on the same underlying KPIs as those contemplated in the approval order structured to fall under the CFTC’s jurisdiction,” Atkins added.
Atkins also described the approval as an example of the SEC and the Commodity Futures Trading Commission (CFTC), which regulates prediction markets, working together rather than at odds with each other.
“For decades, jurisdictional ‘turf wars’ between the SEC and the CFTC have frustrated innovation and left a void of unrealized financial products in their wake,” Atkins said. “Today’s approval order, however, reflects a new spirit of harmonization, innovation, and investor choice, removing unnecessary obstacles to the lawful introduction of novel financial instruments within our markets.”