The Chicago Board Options Exchange (CBOE) has taken an equity stake in privately-held online derivatives market HedgeStreet. Financial terms of the deal were not disclosed.
California-based HedgeStreet, which was launched in 2004, offers low-cost futures and options contracts in commodities such as crude oil, gasoline and precious metals. The regulated exchange also offers financial instruments such as housing prices, the consumer price index (CPI) and weekly mortgage rates, which it claims are not available on any other market.
CBOE says it will partner HedgeStreet to offer binary options and futures to online retail investors. The two firms will also share certain technologies and hosting facilities to achieve cost and distribution synergies.
Terms of the equity stake were not disclosed. HedgeStreet has so far declined to name the amount, but spokeswoman Ursula Burger told reporters that it was in the "seven figures".
HedgeStreet says CBOE's equity investment is part of a larger round of equity and debt financing it has recently secured, which included a portion provided by Norwest Ventures Partners.
William Brodsky, CBOE chairman and CEO, comments: "CBOE's equity investment and alliance with HedgeStreet will serve to build momentum for binary options and this exciting new breed of futures products.
"We look forward to launching a new wave of jointly-developed one-of-a-kind products, while bringing HedgeStreet's existing products to a broader audience."