FT.com site : Exchange takes bet on future events. 
Jeremy Grant in Boca Raton
401 words
17 March 2005
Financial Times (FT.Com)
English

Investors will be allowed to bet on the outcome of US unemployment 
figures or the size of a crop harvest with the launch by the 
Philadelphia Stock Exchange of the world's first "event driven 
futures" contracts trade on an exchange. 

The products are hybrid futures products that allow investors to bet 
on the chance that an event will happen. Previously, all trading in 
event-driven futures has been done "over the counter", or bilaterally, 
between trading parties such as hedge funds and banks. 

Last year, the US Department of Defense stoked controversy with a 
proposal to launch "terrorism futures" that offered betting on the 
chance of a terrorist attack in the US. 

The Philadelphia initiative starts in the second quarter and will open 
the market to ordinary investors and allow participants to see for the 
first time prices quoted for such products in real time. It will also 
offer a wider range of products than is available over the counter. 

Daniel Carrigan, vice-president of new product development at the 
exchange, said: "It levels the playing field for the person on Main 
Street to the person on Wall Street." 

The exchange would initially launch event-driven futures on US 
non-farm payrolls and could extend to harvest statistics and products 
that would bet on upcoming company earnings or the possibility of 
outbreaks of "mad cow disease" (bovine spongiform encephalopathy). 

Asked whether the exchange would consider event futures that would 
allow investors to bet on the outcome of US presidential elections, Mr 
Carrigan said: "If that opportunity existed, we'd definitely pursue it." 

The exchange believes demand for such products will be driven largely 
by hedge funds looking for higher earnings that are not correlated to 
equity markets, where returns are generally lower. 

The products would be traded on a new electronic trading system 
developed by the Philadelphia exchange for its options business and 
which is being used to expand the exchange's futures offerings. 

Sandy Frucher, chief executive, said: "We're going to take the lessons 
of our experience on the options side and marry it to the futures 
side. We think it's a significant new way to approach these markets." 

Susquehanna, one of the largest options market makers in the US, has 
agreed to help develop and make markets in the new products.