FutureSports strikes MLB deal ahead of planned CME baseball futures

Under the agreement announced on Monday, MLB will provide the Chicago-based benchmark provider with Official League Data that the independent index administrator will use to calculate CME FutureSports Performance Indexes (FSPI) tracking individual baseball teams.

“We’re thrilled to collaborate with MLB to create indexes on America’s beloved sport. The business of baseball has grown significantly over the years, and we aim to provide a new way for the industry participants to hedge their capital exposures,” said Rhett Dinsdale, co-founder of FutureSports, in a release.

CME Group plans to list weekly, monthly and quarterly cash-settled futures based on the MLB benchmarks, subject to regulatory review.

The indexes are designed to systematically measure teams' cumulative performance using play-by-play data, creating benchmarks that FutureSports said could be used for hedging and investment purposes.

FutureSports told FOW in August that it is seeking to develop a liquid derivatives market aimed at allowing participants in the sports industry to hedge financial exposures, positioning its products as an alternative to binary event-style contracts. Dinsdale said at the time there was “a huge appetite in sports for exchange traded risk mitigation”, while co-founder Leigh Taylforth said the firm's planned futures and options on futures were designed to operate through traditional derivatives market infrastructure.

Indexes target sports-related exposures

FutureSports said the indexes will be administered using transparent, rules-based methodologies derived from MLB's Official League Data, with index values determined independently from the league.

MLB will have no involvement in determining, calculating or governing the indexes, which will remain the responsibility of FutureSports.

The agreement comes after the CFTC signed a memorandum of understanding with MLB in March, marking the first formal agreement between the US derivatives regulator and a professional sports league. The arrangement established a framework for the CFTC and MLB to cooperate and exchange information aimed at protecting the integrity of professional baseball and related prediction market activity.

FutureSports and CME Group will also work with MLB on integrity matters related to the proposed baseball futures, including a framework for sharing information in accordance with applicable law.

The planned contracts would expand CME Group's push into futures based on professional sports performance.

The MLB agreement comes ahead of CME Group's planned launch of futures tracking FutureSports' NHL performance indexes on September 28, pending regulatory review. The hockey products will include standard contracts valued at 10 times the underlying CME FSPI NHL indexes and micro contracts valued at one-tenth of the indexes, with CME saying the futures are designed to help sponsors, broadcasters, arena operators, retailers and other participants manage risks associated with individual NHL team performance.

The NHL contracts will be CME Group's first major-league futures based on FutureSports' performance indexes, with the proposed MLB products extending the model across another major US professional sports league.