Posted on 10/16/2008 11:38:02 PM PDT by Kevmo
Alleged Manipulation on Intrade
John Delaney, CEO, Intrade
Submitted: 10 16 2008
Intrade Comment on Alleged Manipulation in the Presidential Markets
There has recently been vigorous discussion of unusual trading activity on our political prediction markets. What could be motivating the activity has been subject to widespread speculation by academics, journalists, our own users and others. Some external commentators have claimed the unusual trading patterns indicate that our markets are being intentionally manipulated for political purposes. Others have gone further yet.
Part of the public utility of Intrade markets hinges on the quality, scope and usability of the predictive information they provide. Another part hinges on providing a marketplace where investors may assess and manage risk by trading on innovative markets.
The trading activity on our platform that is the subject of great speculation centers around two particular markets: 2008.PRES.McCAIN, and 2008.PRES.OBAMA. To a far lesser extent 2008.PRES.CLINTON(H). A number of such occasions are depicted in the charts below.
The trading that occurred during these times may be summarised as follows...
1. Multiple large volume Buy orders placed and matched rapidly caused the McCain market to move significantly above the previously prevailing market price by up to 10 pts. 2. Multiple large volume Sell orders placed and matched rapidly caused the Obama market to move significantly below the previously prevailing market price by up to 9 pts. 3. The market prices of the contracts then seemed to represent discrepancies between overlapping Intrade markets, and also between Intrade markets and similar markets on other platforms for some time thereafter.
We have carried out an extensive investigation into this matter including but not limited to...
1. A full and careful examination of the publicly available information on the trading - our exchange notably provides public free access to all time-and-sales and closing price data on all open markets. 2. A full and careful examination of all non-public information (orders, positions, accounts, IP addresses, physical addresses, customer documentation including copies thereof). 3. Communication both verbal and in writing with those involved. 4. Full and complete consideration of specific applications our Exchange Rules in light of the trading activity in question.
As a result of our investigations we would like to advise the following.
The trading that caused the unusual price movements and discrepancies was principally due to a single "institutional" member on Intrade. We have been in contact with the firm on a number of occasions. I have spoken to those involved personally.
We are satisfied that they are using our markets in good faith and in the ordinary course of their business and that there has been no contravention of our Exchange Rules. Our investigations lead us to believe that the member is using increased depth in these markets to manage certain risks.
Further, it is apparent that the cost of time in accumulating the desired positions by those "institutional" members responsible for moving the McCain market up and the Obama market down differs fundamentally to loyal "retail" members that Intrade relies on.
The Exchange views this unusual activity as an indication of the increased relevance and traction of Intrade markets as risk management tools coupled with the yet maturing state of the prediction market industry as a whole.
As our markets gain further fluency and are more broadly used to help manage risk, we expect to see other cases where single, well-financed parties accumulate large positions in short periods of time in our markets and possibly distort prices away from prices on other platforms. As funds flow between platforms gets easier, arbitrage opportunities will last for far shorter periods that is currently the case.
In any and all future similar cases, we will diligently monitor the activity, the accounts and profiles of those responsible and take whatever action is in the best interests of all exchange stakeholders.
In an era when lack of transparency is rightfully being considered persona non gratis it is perhaps relevant to note again that we are determined to provide maximum transparency of all exchange activities free of charge including real-time market data, time and sales and volume as per the links at the bottom of this post.
We are thankful for your interest in this matter and in Intrade.
With very best regards
John Delaney CEO Intrade.com
http://www.intrade.com/jsp/intrade/misc/blog/?initialBlogId=jd_1
Here's the forum where this article is being discussed at Intrade: https://bb.intrade.com/intradeForum/posts/list/2796.page
Here’s the announcement by John Delaney:
http://www.intrade.com/jsp/intrade/misc/blog/?initialBlogId=jd_1
Here’s the forum where this article is being discussed at Intrade: https://bb.intrade.com/intradeForum/posts/list/2796.page
Who cares? If people are doing something stupid and offering you more value on one or the other, take it.
Okay,I just checked Intrade's site "2008 Presidential Election Winner", and they have Obama up 85-15 over McCain.
What is he smoking?
Does anyone in their right mind think Obama is going to win in that kind of landslide?
Does anyone in their right mind think Obama is going to win in that kind of landslide?
***Apparently thousands or hundreds of thousands do. I think it’s a wonderful opportunity to support McCain and make money at the same time. Don’t say I never did you any favors.
85-15 doesn’t imply a landslide... it’s just the Vegas odds for a win.
What the hell is wrong with these people?
Okay, I get it. They’re betting 85-15 it will be a win. Even if it’s only a .5% win.
Intrade is a market, not a bookie setting odds. If you think the odds of him winning are better than 15% then for you it’s a buy. For someone else it may not be enough. That’s the way markets work. It sounds like you don’t understand that part of the Intrade concept.
But this seems to imply that there is some attempt by some large investor to manipulate toward McCain. I can't believe the McCain camp would waste their time with it.
I remember when Intrade had Hillary way out front and Rudy a distant second. Their investors aren't any smarter than other stock market investors.
Buying McCain at 15 is great odds and a great bet.
George Soros?
But this seems to imply that there is some attempt by some large investor to manipulate toward McCain.
***You obviously didn’t read the article. It was an institution looking to hedge some risk.
I agree. Tell your friends. Shoeshine boys will be delivering this tip on Tuesday.
I've heard enough of these phrases:
We have carried out an extensive investigation
A full and careful examination
I have spoken to those involved personally.
We are satisfied that they are using our markets in good faith
"Trust Me"
I understand. You’re embarrassed because you didn’t comprehend the article and now you’re backtracking. Or perhaps it is that you only read the title.
You got me!
“Intrade is a market, not a bookie setting odds. If you think the odds of him winning are better than 15% then for you it’s a buy. For someone else it may not be enough. That’s the way markets work. It sounds like you don’t understand that part of the Intrade concept.”
Correction for above advise...if you think the odds of McCain winning are higher than 50% then the present 15% odds at Intrade make this an excellent opportunity. You cannot win after election time because unlike markets this one ends. So, it is like gambling because there is a specific event determining the end of the bet. It is more like a bookie setting odds than you might think.
Intrade isn’t like the stock market...it is gambling. There is an end to the gamble when one wins or loses. Markets continue on without a specific event ending the investment. With the exception of a company folding.
Or a certain loss.
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