Soundings

“I skate to where the puck is going to be, not where it has been.” – Wayne Gretzky, by way of his father, Walter Gretzky 

There is no such thing as ice hockey season. Anyone who knows us will not be surprised that hockey is a topic of our Monday morning meetings year-round. What’s different this week is that Wall Street gave us a reason to talk hockey in this week’s Sounding. 

On August 14th, Volatility Shares filed to launch ETFs tied to the performance of the 32 teams that comprise the National Hockey League (NHL). Team performance will be measured via a CME FutureSports Performance Index (FSPI) which awards points based on data supplied by the league.  

Unlike the proposed prediction market ETFs, the indexes are transparent and rules-based and not built on binary outcomes. Each team starts a season with a baseline score of 7,500 – and the score is updated in real time based on 55 performance metrics. Positive outcomes like goals scored, shots on goal, goalie saves, and power plays increase the score; negative outcomes such as goals against, turnovers, and penalties decrease the score. 

Contracts based on these indexes listed on CME offer a means for affiliated organizations and entities – think stadium operators, insurers, networks – to hedge operational and business risks. If approved, this series of “novel” exchange traded funds (ETFs) would put those contracts into the portfolios of investors.  

Volatility Shares expects to roll over the contracts throughout the season introducing the possibility for backwardation and contango – which are more difficult concepts to explain than icing.     

The 1940 Act attorney whose unprofessional opinion we sought (and who in full disclosure is only a passing hockey fan) suggested these ETFs should face significant scrutiny from the Securities and Exchange Commission (SEC) but did acknowledge that the agency has signaled greater openness to novelty than under the previous administration.   

So, if you happen to catch me talking about the Habs securing Ivan Demidov and Jakub Dobes in the off-season – or wondering aloud if the Oilers will finally build a team around Connor McDavid and Leon Draisaitl – please know that this should not be taken as specific investment advice, nor a guarantee of future performance.  

Tide Cycle Resources (Tide Cycle) is an investment advisor registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. A copy of Tide Cycle’s Forms ADV Part 2 and Form CRS are available without charge upon request. The opinions expressed are those of Tide Cycle. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Nothing contained in this document may be relied upon as a guarantee, promise, assurance, or representation as to the future. This should not be taken as specific investment advice. We recommend consulting an investment/tax professional before making financial decisions based on any information provided.

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