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Introducing... US election derivatives

Wednesday 21 December 2011 - by Regulation Mutters

Barack Obama (photo by the White House) - soon to be a tradeable commodity?
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...

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