It seems Nasdaq has filed an interesting regulatory application. They are trying to list binary-style options linked to the Nasdaq 100, known as OROs, on the U.S. market.

This proposal was submitted to the SEC in early March, and I think it’s a move worth paying close attention to. Nasdaq’s subsidiary exchange, Nasdaq MRX, is establishing a new rule called "Option 3B" to create a framework where Outcome-Related Options can be officially listed and traded.

The mechanism of OROs is simple but intriguing. Essentially, at expiration, the payout is determined based on how the index moves relative to a specified strike price. It’s a binary, yes-or-no type contract, so unlike traditional index options where returns vary with price volatility, the payout is fixed. The premium ranges from $0.01 to $1.00, and that price range itself indicates the probability of the event occurring.

They plan to deploy OROs on both the Nasdaq 100 (NDX) and Nasdaq 100 Micro Index (XND). Each contract has a multiplier of $100, and settlement is calculated based on Nasdaq’s closing cross. The exchange has set a cap of 25,000 contracts on the same market side, incorporating some risk management.

A key point is that this will be regulated under SEC oversight. It’s not under the CFTC (Commodity Futures Trading Commission), but under the SEC framework. The documents clearly position these as “securities.” In other words, binary-style derivatives are being formally integrated into U.S. securities regulation.

Within the industry, the prediction market sector is said to be hot, with estimates suggesting annual trading volumes could exceed $300 billion. Against this backdrop, the move by major exchanges to formalize products like OROs may be a sign that the market is entering a significant expansion phase.

However, the relationship with traditional derivatives markets could become complex. As regulated large exchanges and event-driven derivatives overlap, it will be interesting to see how future regulatory environments develop.