First Healthcare Derivatives Market Approved by the CFTC

CFTC approves IMX Health

Earlier this year, the CFTC approved the first-ever healthcare derivatives market. Intelligent Medicine Exchange (IMX)™, founded in 2021, was granted its designation as a Designated Contract Market (DCM) on January 18, 2024. IMX Health, LLC, a subsidiary of IMX, LLC, is registered in Delaware but headquartered in Chicago, IL. The Minneapolis Grain Exchange (MGEX™) will partner as their clearinghouse. IMX Health is one of 17 approved DCMs in the nation and will trade derivatives for price discovery and risk transfer creating a more transparent health care industry.

Healthcare Derivatives

IMX Health recognized a need for a healthcare derivatives market. The healthcare industry incurs over $4.5 trillion in costs per year, almost 20% of the United States GDP. There are existing derivative markets for energy, water, and even weather, but none for healthcare. A derivatives market will help the healthcare industry hedge risk, navigate uncertainties, and stabilize prices. IMX Health offers a unique solution to issues in American healthcare by connecting finance and healthcare.

The concept of trading derivatives on healthcare can seem ambiguous, but founders of the market, Jim Plante and Greg Simon, envision a broad range of offerings. This includes a healthcare index similar to the NASDAQ-500, as well as specific indexes for diseases, treatments, and drugs.  These types of products would allow investment managers, insurance providers, pharmaceutical companies, and other major actors in finance and healthcare industries to stabilize and reduce the cost of healthcare.

Examples of products that could be sold on the market include:

  • Futures on migraine medicine prices;
  • Futures on healthcare premiums; and
  • Futures on knee replacement procedures, among others.

There are many healthcare providers and financial actors that could benefit from this market. Derivatives on insurance are attractive to employers who want to forecast employee insurance costs and to insurance companies who want to guarantee future revenues. By selling futures, hospitals could guarantee their revenue will cover costs, which would allow them to lower the price of their care. Pharmaceutical companies could hedge the risk incurred during R&D development for drugs used in critical disease care.

IMX’s First Offerings

IMX Health plans to begin trading by Q2 of 2024. Their first contract will be cash settled futures based on the U.S. Morningstar Healthcare index. The U.S. Morningstar Healthcare index tracks the performance of over 170 corporations in the healthcare industry including major pharmaceutical companies, CROs, hospitals, and other healthcare entities. The index includes major players in the healthcare industry like Eli Lilly and Co., Pfizer, AbbVie Inc., Roche, and other healthcare conglomerates. IMX Health also has proprietary healthcare indexes. Through their AI model IMX GPT, they created cost indexes from collected de-identified medical data on claims from nationwide healthcare providers. This derivatives market could greatly impact the finance of the healthcare industry.

Put Patomak’s Expertise to Work 

Patomak has deep experience in designing and assessing compliance programs at banks, swap dealers, broker-dealers, digital asset trading platforms, and other financial firms. If you’d like to learn more about how Patomak can partner with you, contact Jill Sommers (