October 29, 2014

CFTC Staff Provides No-Action Relief for Victoria University of Wellington, New Zealand, to Operate a Not-For-Profit Market for Event Contracts and to Offer Event Contracts to U.S. Persons

Washington, DC — The U.S. Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight (DMO) today announced the issuance of a no-action letter for Victoria University of Wellington, New Zealand (University), to operate a not-for-profit market for event contracts, and to offer event contracts to U.S. persons, without registration as a designated contract market, foreign board of trade, or swap execution facility, and without registration of its operators.

The University’s proposed market for event contracts is similar to the Iowa Electronic Markets (IEM) operated by the University of Iowa. CFTC’s Division of Trading and Markets, which preceded DMO, previously granted no-action relief to the University of Iowa with respect to the operation of the IEM by letters dated February 5, 1992, and June 18, 1993. Like the IEM, Victoria University of Wellington’s proposed market for event contracts consists of submarkets for binary contracts concerning political elections and economic indicators, is operated for academic research purposes only, and its operators, who are faculty at the University, receive no separate compensation.

The University’s main objective for its event contracts market is to determine whether it can aggregate information and predict outcomes of certain events more accurately than through alternative means, such as public opinion polling. The University plans to use the results from its market as teaching tools in its courses on statistical analysis, market theory, and trader psychology, and as supporting data for research papers and analyses.

The University’s market would vary from the IEM model in certain respects, including a larger allowable number of traders in its market, as well as a higher, inflation adjusted cap on investment by any single market participant. DMO believes that each of these variances is intended to promote the educational public interest purpose of the project, while maintaining the market’s small-scale, not-for-profit nature.

Last Updated: October 29, 2014