SEC clears Nasdaq proposal for prediction market options tied to benchmark index

By Mrinmay Dey

April 30 (Reuters) - The U.S. Securities and Exchange Commission on Thursday approved a proposal by Nasdaq's NDAQ.O 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.

Several firms are increasingly seeking to enter the prediction markets space, which allows users to bet on the outcomes of real-world events as it gains legitimacy and opens up new revenue streams and market insights.

The New York-based exchange operator's products are cash-settled contracts that pay a fixed amount at expiration depending on whether the index finishes above or below a set level.

The SEC said the binary options - ​a type of contract that offers a payout based on the outcome of ​a yes-or-no bet - would have a "fixed, all-or-nothing exercise settlement amount" of $100 if they expire in the money.

Nasdaq MRX, an electronic U.S. options exchange operated by Nasdaq, will initially list the options linked to the Nasdaq-100 index and the Nasdaq-100 Micro index.

The Nasdaq-100 tracks 100 of the largest, non-financial companies ‌listed ⁠on Nasdaq's exchange, including Apple AAPL.O, Nvidia NVDA.O and Intel INTC.O. The micro index is based on 1/100th of the full value of the Nasdaq-100.

The commission granted accelerated approval to Nasdaq's request that it applied for in March, saying 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 (OROs) tied to the Nasdaq-100 Index," a Nasdaq spokesperson said.

Its peer and options heavyweight ​Cboe Global Markets CBOE.Z is also targeting a second-quarter launch ​for its "all-or-none" styled contracts focused on financial and economic events, subject to regulatory ​approvals.