The Wall Street Journal reports that Charles Schwab is working with Cboe Global Markets to introduce a contract that allows clients to predict “yes” or “no” on the performance of the S&P 500.
The company plans to launch these products in the coming months, marking its first foray into the growing predictive market space.
The contract uses a binary options structure. A certain amount of cash is paid if the S&P 500 closes above or below a predetermined level, but nothing is paid if the conditions are not met.
This product is different from the futures contracts offered by traditional prediction market platforms, but offers a similar fixed outcome structure.
Schwab is also preparing a related Cboe product with a feature known as Plus Zone. This provides a partial payout if the trader’s direction is correct but the index does not finish at the exact target.
Cboe introduced a framework earlier this year to replace the standard all-or-nothing contract. Its initial product will be tied to the mini-S&P 500 index and will be settled in cash.
The move puts Schwab in line with brokerages such as Robinhood and Interactive Brokers, which have already expanded into event-based financial contracts.
Schwab CEO Rick Wurster has previously said the company is more interested in predictive products related to financial markets than contracts based on sports, politics or entertainment.
The planned product offering will continue to focus on market outcomes and will allow Schwab to enter this space through regulated options products rather than broad event betting.
