Thoughts on using event contract to hedge or trade high impact events risks?

Schwab himself was part of one of our funding rounds, as you can see reported in the Wall Street Journal.

We're a regulated exchange and work with a CFTC regulated clearing house, and all user funds in a segregated custory account at a US bank. When you get into a position we have the funds from you and your counterparty, and we allocate to the winner at settlement. There's no margin in our system so no default risk. You're right that the money from the counterparty is held by the clearing house.

We have extensive KYC to meet our regulatory obligations, so we know every person or company trading on the exchange.

We have a couple of different CPI markets, here are a few:
US Core CPI (monthly): https://kalshi.com/events/CPICORE-23APR/markets/CPICORE-23APR-T0.2/
US CPI (monthly): https://kalshi.com/events/CPI-23APR/markets/CPI-23APR-T0.2/
US Annual inflation: https://kalshi.com/events/ACPI-2023/markets/ACPI-23-B3.5/

I'd love to chat more about the inflation markets if you're down, if you just DM me some times that work for you I'll find a way to be there

 

We have a lot of traders providing liquidity in different markets. Some of the traders are small funds that specialize in market making for event contracts. However, everyone can market make, we have an API that makes that really simple if you're interested.

How wide the markets are really depends on the market, our spread is usually around 1c for our most liquid markets. If you let me know the types of contracts you're most interested in I can check the spread on those and get back to you.

We do charge fees for takers (if you're taking liquidity from the exchange), but if you're providing liquidity (placing resting orders) you pay no fee. The fees average at less than a cent per contract.

The max size we accept also depends on the contract. For our inflation markets the maximum exposure you can have in the market is $7M. Soon our Fed related markets will also have a maximum exposure of $7M.

Let me know if I can help with anything else!

 

I think Goldman tried to offer something similar in the mid 2000s. I don’t think it ever got any traction. Hedging is difficult so you need natural axes.

 

Goldman actually still offers products very similar to ours via their exotics desk, but you need to be their client to be able to trade those. What do you mean by natural axes?

 

i don’t think they are liquid. I saw the pitch for the products and never heard anything after that. I’ve also been out of the industry for 12 years.

Your products are unhedgable outside your ecosystem. the only way to get a good market is if someone actually wants to take the other side (they are biased to have the opposite exposure as you)

 

I read more about this post. I must say I like what I read. This is a great innovation that allows us retail investors to be able to trade specific targeted events and potentially gain financially. The way I see it, it's like packaged mini-ISDA except in a systemic exchange in a structure everybody can participate. I see great potential in this.

And also when we trade on the event exchangers, who's our counterparty? Who are we trading against? Other traders? The exchange operators? Or is this like betting on a horserace or sports betting? And where is our funds deposited? What's the custodian bank of our funds? How would we know that our funds are segregated from the company's operating funds? Would this be audited? Are you a FCM registered with CFTC?

Like I said, this has great potential but there are a lot more details that I would like to find out.

 

I will add one more event: Will China invade Taiwan? And would USA actually intervene like what it did in the Gulf War?

 

I called and talked to Luana...She and the company seem legit. She answered many questions, that many of you will be getting answers to very soon. I told her she really needs to delegate to others, many of these questions. She also gave me a number of someone in the company, who would provide the services (hand holding) that would be needed for what I want to pursue.

I am not saying I will invest...But, I will do my due diligence from here (and not go hog wild)...

Thank you Luana...

PS About 40 years ago Charles "Chuck" Schwab was on KNBR in San Francisco...Taking calls. I was able to call in and ask a couple questions...Be still my heart!!

 

You also mentioned that each event is compromised of different financial instruments in a bundle? How is the bundle priced? Would we actually be able to know what instruments are used in the financial bundle to trade on a specific event? If we do, we might, just might be able to hedge against our trade on our own or do you provide some kind of hedging facilities?

And also if we "win" on what we bet, how do you allocate the funds to the winners?