The Chicago Board Options Exchange (CBOE) and HedgeStreet Inc., the newly designated U.S. exchange for binary options and futures, announced that they have entered into an alliance for the joint development of new products, sharing of technology services, and marketing and support of HedgeStreet’s binary options and futures products, known as Hedgelets.
HedgeStreet’s binary options are typically short-term in nature, and are based on the value of the underlying instrument. The payout is determined by whether the option is in-the-money or not (they are sometimes referred to as “yes-no” or “cash-or-nothing” options). HedgeStreet also offers futures Hedgelets, or “capped futures” contracts, which feature a variable payout depending on how much the underlying asset moves up or down. HedgeStreet currently offers contracts on commodities such as gasoline, crude oil and gold, as well as unique financial instruments such as Housing Prices, Consumer Price Index (CPI) and weekly Mortgage Rates that are not available on any other market. HedgeStreet is regulated by the Commodity Futures Trading Commission (CFTC).
Under the agreement, CBOE and HedgeStreet will collaborate on retail distribution of their contracts via joint marketing initiatives and will share certain technologies and hosting facilities to achieve cost and distribution synergies. The agreement also involves an equity investment by CBOE in HedgeStreet.
“CBOE is extremely pleased to join forces with HedgeStreet as we share a common culture of innovation and a willingness to develop new approaches to trading,” said CBOE Chairman and CEO William J. Brodsky. “CBOE’s equity investment and alliance with HedgeStreet will serve to build momentum for binary options and this exciting new breed of futures products. We look forward to launching a new wave of jointly- developed one-of-a-kind products, while bringing HedgeStreet’s existing products to a broader audience. “
John Nafeh, chairman and founder of HedgeStreet said, “By combining HedgeStreet’s powerful online model with CBOE’s reach, financial strength and technology, we are creating a winning combination.”
“We are thrilled to team up with CBOE. Because each of us brings complementary assets, we will be able to leverage our unique strengths to capture emerging opportunities and offer investors a multitude of new and interesting financial contracts online,” said HedgeStreet CEO Steve Race.