Tuesday, December 16, 2008

New Contract Rule Commentators Sought

We are going to implement (initially on a trial basis) the solicitation of comments from active traders and subject matter specialists on contract rules for new markets before we list them.

This will not apply to every new market but will more often apply to new categories or new events.

The objective of this innovation will be obvious to many but it’s consistency with the wisdom of crowds is appealing as we are looking to tap into a greater and more diverse knowledge base.

If you wish to receive by email notification of new markets with draft rules where you will have a short time to comment please let me know and I will add your name to the list.

email john.delaney@intrade.com

Tuesday, December 2, 2008

G.W. Bush: Biggest Regret?

After reading this article I started to think about the good and bad things that G.W. Bush presided over.

While his stated biggest regret is the failure of intelligence in Iraq it got me wondering if people believe this should be his biggest regret if he should have any at all.

Whatever your view it would be great to hear them on this topic.

Wednesday, November 19, 2008

Futures on Intrade's Future

These are uncertain times when we should place a premium on transparency.

Knowing the likelihood that your customer, supplier or counterparty will be in business in a year or two is valuable information. Being able to hedge against the closure of a business that you are exposed to have risk management and wealth preservation potential.

Intrade has always strived to list innovative markets that give maximum transparency in real-time on uncertain future events.

We have now just listed 4 new markets on whether Intrade.com will open and operational at the end of June 09, December ’09, June ’10 and December ’10.

The markets can be accessed here…


We may list additional markets on other businesses in the future.

Monday, November 3, 2008

"This Too Shall Pass"

And when it does, what follows can be the best if we use our best resource.

The phrase "This too shall pass" and the associated ring story were made popular by Abraham Lincoln. King Solomon searched for a cure for depression. He tapped the collective wisdom of his wise men for advice: Make yourself a ring and have thereon engraved the words "This too shall pass" they advised. The King carried out the advice and every time he felt depressed, he looked at the ring and his mood would change and he would feel cheerful.

A wise crowd behind a wise man.

Like me you may be jaded by the non-stop talk about financial crisis, recession, wealth destitution, damaged societal welfare and worst of all depression. But let’s put things in perspective.

Yes, our global financial systems have suffered what may be described as a near fatal heart attack, and while they are still very ill the best financial surgeons are pooling their talents to solve the problems. The surgeons, aka government leaders and central bankers, are working hard together to stabilize and reduce the likelihood of another financial heart attack.

The origins of the financial crisis (a credit but more latterly a liquidity crisis) is that we all have bought vast amounts of property that produced toxic by-products that clogged the arteries of the financial system. It is true that we could not have bought these properties had money not been lent to us. It is also true that some of our lenders, although not all, were aware that the lending they facilitated was risky.

Before the financial crisis our economies were not in great shape. Yes they were growing a little, but many economies had become "fat and happy" and very inefficient after almost 10 years of prosperity. Ireland was the poster boy of the" fat and happy" club.

Now, partly as a result of the crisis, our economies are not growing or worse are actually contracting. This means that people are losing jobs, losing homes, losing “nest-eggs” and a sense of security for the future. Millions of people are stressed and worried about their future and their contentment and peace of mind are damaged. We may still be fat, but not nearly as happy.

The financial and economic shocks to our systems, and indeed our psyches can perform a very useful service. Yes they will be painful, but pain whether it is financial or physical alerts us to our problems.

While we all (you, me, bankers, regulators, the media etc) are responsible for the current correction what’s important now is focusing on the specifics of the problems, to ensure we do not undermine the positive impact that a recession can have while avoiding the evils of a depression.

We all caused our current problems, and we must all be involved in the solution, not just the government or regulators.

Those we have placed in leadership positions in our countries are stepping forward but neither they nor we should be short-termist. They should not keep economically defunct industries, practices and procedures alive with borrowings, but they should increase investment in our competitiveness and productive capacities. It that means an increase in borrowing which it will then so be it.

Our countries have huge amounts of natural and neural basic resources, but to increase our wealth we must increase our intellectual and physical capital, i.e. we really need to make changes to our education system, our attitude to work, our attitude and use of resources, and national and international infrastructure. Education seems #1 to me.

A laser focus on such matters is no magic pill. These are medium and longer term deliverables (i.e. more than can be achieved in 4 years). They will not provide the immediate feel good factor as we suffer withdrawal from the almost instant gratification that the explosion in consumer credit facilitated.

Our #1 untapped resource is the vast collective intellect that we have only started to use. Harnessing the "wisdom of the crowd" has a very big potential role in improving all of our lives. If we do it, we all have a voice and will feel part of the solution as well as the problem. We can solve some wicked problems, like climate, resource, growth, social, and economic challenges. In simple terms, there exists between us the best information on how we solve our key challenges. If our leader’s embrace and permission new systems like prediction markets to operate in a transparent prudent way I am convinced that we can contribute in no small part to the solution.

Recall, that US Department of Defence believed a prediction market could provide valuable information on growth, risks and social issues. Hundreds of academics, dozens of Fortune 500 companies, and millions of people believe that prediction markets can help provide valuable information on economic, financial, social and environmental issues.

Improved ways of working, regulating, and consuming are all within our grasp if we tap into our greatest resource. Our intellect! And the great thing about I.Q. reserves as distinct from our oil reserves is that they increase the more we use them.

We have harnessed the energy of a small atomic globe in the last century, and we can harness the collective intellect of our much larger one in this century. The only question is when? The leader's that we have or are about to elect need to be as brave and innovative we are.

And whether you are a president, a plumber, or a regular person just like me no matter what today or tomorrow holds never forget the wisdom that a wise group gave a wise king.

Tuesday, October 28, 2008

Crisis = Opportunity

Prediction markets have a big role to play

Historic volatility, unprecedented coordinated bailouts, nationalizations, and bankruptcies of some of the doyennes of the financial elite are just some of the new realities we are all faced with.

Many may well be impressed with the speed and scope of the response to this crisis. I am, but it seems to me that Intrade and all in the prediction market industry have an increased obligation and opportunity to contribute to solutions in avoiding future crises.

Since Enron, WorldCom, Tyco et al and again since this crisis ignited we are being told that maximum transparency, disclosure, and better risk management tools are the answer. These solutions are exactly what prediction markets look to and can deliver.

But is something really transparent if it is buried within a 200 page document or if you need a degree in accounting to decipher it? Likewise, if the costs of producing or gaining access to the information is such that only a few benefit, is that maximum transparency and disclosure?

The Sarbanes-Oxley Act (SOX) introduced after the Enron / WorldCom debacles is considered a success by most. However, in light of recent events and comments from Henry Paulson, John Thain and even former AIG chief Hank Greenberg, who all believe SOX threatens the US competitive position in the global marketplace, it hardly seems a panacea.

This is where prediction markets can really help now and in the future. We offer real-time aggregated collective intelligence that is easy to access and interpret. E.g. recession, tax rates, unemployment, offshore drilling, OPEC actions, bank failures, etc. Prediction markets provide a single number -- the probability or risk of something happening. Right now there seems to be a 75% probability that the US will be in recession in 2009.

To get the best predictive information barriers to entry for participants and providers must fall so that adoption and diversity can grow. To contribute their maximum to society (which we expect will befit Intrade and other leaders in our industry) prediction markets need to be embraced, encouraged, and considered part of a solution to managing risks and change. Only when this happens will there be such diversity and adoption that the markets can reach their full potential in aggregating information on the most important issues.

In addition to new and revised regulations, the time is right for expanded coverage of those regulations to include prediction markets and the innovative solutions they offer. If ever there was a time to embrace innovative solutions for assessing and managing risk it seems that time came before I started to write this short note.

Prediction markets are far from perfect, but they typically deliver incentivized real-time, efficient, aggregated probability estimates on uncertain future risks and events. They have never had a more important role and potential than right now.

I welcome your comments.

John Delaney, CEO, Intrade.


Tuesday, October 21, 2008

We Want Talent!

I am likely to be severely reprimanded for using this forum to post a blatant advertisement. Apologies in advance.

While others are downsizing, and we face a reduction in trading volumes after the election we are still looking to add to our small team. This contrarian behaviour which you may rightly view as at-odds with crowd wisdom is probably another reason for being reprimanded.

If you are interested in being part of a small team who are passionate about the role and potential of prediction markets, a new niche that Intrade has in part created you will find details here.

Some additional information…
  • We have a small number of big initiatives that need additional resources
  • There are less than 20 full time people employed at Intrade everyone has the opportunity to have a big impact
  • Our comment to the CFTC on the treatment of prediction markets is here, and all industry comments are here
  • We have an exciting plan for a future that needs better information and transparency
If you really believe you have a lot to offer, I would love to hear from you.

Best regards,


John Delaney


Update October 28: We are thrilled to have received over 100 high quality applicants in the last week or so. It will take us a little time to work through them all and revert to people. Thanks for your patience in the interim.

Thursday, October 16, 2008

Price Variances on Intrade Political Markets

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 (i.e. as they mature furtuer) 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. Additionally, we will start publishing more details about trading volumes and open interest on our exchange just as soon as possible.

We are thankful for your interest in this matter and in Intrade.

With very best regards

John Delaney

Update: See comment in the New Yourk Times http://www.nytimes.com/2008/10/20/business/20predict.html?ref=business