The US Commodity Futures Trading Commission’s Division of Market Oversight today issued an advisory that addresses the listing and trading of event contracts that are based on whether an individual will say or “mention” certain words, attend or appear at an event, or otherwise interact with another person, which are commonly referred to as “mention market” contracts.

These contract types present a heightened risk of manipulation because their settlement turns on the discrete conduct of a person that may be neither independently generated nor externally verifiable.

Mention Markets

Mention Markets allow market participants to take positions on whether a specific individual will use certain words or phrases in a defined or specified public forum, such as during a speech, on an earnings call, or on social media. Attendance- and interaction-based (e.g. by shaking hands, being photographed together, or engaging on social media) event contracts listed by DCMs have similarly depended on the discrete conduct of an individual.

In certain circumstances where the costs of manipulation or the likelihood of detection is low and sufficient safeguards are absent, the person whose conduct determines settlement (or those in close proximity of such person) may readily influence the outcome of the contract, exploit advance knowledge of it, or both.

Similarly, contracts that settle on individual actions occurring in informal or private settings or by non-public persons may present increased risk of manipulation because they lack the benefit of public scrutiny and independent verification. In light of these concerns, DMO staff are issuing this advisory to set forth their views on the listing of Mention Markets contracts and their compliance with Core Principle 3.

CFTC advisory

The advisory outlines the limited circumstances in which such contracts may be listed consistently with the Commodity Exchange Act and Commission regulations, and provides non-exhaustive examples of factors that DCMs should consider when designing and submitting mention market contracts under Commission Regulations.

The advisory also reminds DCMs of their obligation under Core Principle 3 to list only contracts that are not readily susceptible to manipulation and emphasizes the importance of providing complete, contract‑specific analysis when submitting these products under Part 40.

The CTFC advisory on Mention Markets can be seen here (pdf).