There’s been a lot of hype around prediction markets over the last few months, but something else that I think we’re likely to see more of in 2026 is synthetic indices.
We’ve looked at these before. They are essentially indices based on random number generators, designed to exhibit a certain level of volatility over a set period of time. For example, you could trade an index that will crash or spike by 50% every 5 minutes, amplified by whatever leverage settings are applied. Importantly, the indices do not have an expiry, meaning they are not classified as an option or futures contract.
Deriv was the first broker to really pioneer synthetics and has apparently seen huge success in Africa off the back of doing so. Other players, like ThinkMarkets and FXPrimus, have also added the products. One major broker that I am aware of is also planning to add them.
There is a good reason for that. According to StochasticEQ, which has become a popular B2B provider for synthetic index price feeds, firms that have used their products have tended to see incremental revenue growth of 3%. Prop firms are also adding the products and have seen equivalent growth of 5% – 10%.
“Our internal assumption is that revenue growth from synthetic indices can go higher once a bigger size of the trading client base becomes familiar with the products,” said a spokesperson for StochasticEQ. “We see this happening already because there are more and more brokers either adding synthetics or who are in the process of doing it.”
The main appeal of synthetics is actually not that different from prediction markets. You know that the asset you are trading will exhibit a certain level of volatility over a known timeframe. You also know roughly how much money you stand to make because of the pre-defined volatility.
There is a palpable gamification element when you trade them as a result. For example, I traded a demo version of one StochasticEQ product. I placed four trades in two minutes before rage quitting because I was down. I’ve done the same with my Deriv account before as well and had a similar experience – although with them I made money.
Another obvious benefit is the fact synthetics can trade 24 hours a day, 7 days a week. If I was bored in the evening or on the weekend, I can easily imagine getting out my phone and playing this like a slot machine.
“When we started, we knew that the product would appeal more to the audience that likes the game-y style of trading,” said the StochasticEQ spokesperson. “What we have also seen is a big adoption of users trading on weekends and evenings – essentially whenever markets are closed for them.”
According to StochasticEQ, the product has also proven popular among IBs and affiliates, who have an additional product to share with users. A quick search for the product on Instagram brought up a bunch of posts from Deriv affiliates sharing content related to synthetic indices.
Another interesting fact is that, even though synthetic indices behave a lot like OTC options, they trade continuously. As a result, you can offer them in the European Union – something Deriv is already doing.
There is also some similarity to CFDs on leveraged ETFs, which most major UK and EU brokers now offer, because there is volatility baked into the product, which can offset some of the impact that leverage caps have.
The logistics of adding synthetics is not that hard. StochasticEQ offers a plug-and-play solution through the Unifeeder protocol for both MT4 and MT5, as well as via FIX API. Brokers can connect to the price feeds within minutes and test the assets internally.
“We currently have 12 different types of synthetic indices,” a team member at StochasticEQ told me. “We create a unique price for each client that we have, so no two brokers are ever using the same product. Brokers can also brand and market our synthetic indices in whatever way they want because of that.”
One point to be aware of is that brokers cannot hedge the risk that trades on these instruments create. However, the price feed that brokers get from StochasticEQ gives them a built-in edge that they can use to manage their exposure.
Ultimately all brokers want volatility and new products for clients. Synthetic indices provide both.
Talk to StochasticEQ to learn more about how you can add them.
