Comments on: CFTC regulation and election contracts http://www.midasoracle.org/2008/05/26/cftc-regulation-and-election-contracts/ Prediction Markets For All Sat, 22 Nov 2008 00:10:41 +0000 http://wordpress.org/?v=2.6.3 By: Do not pay any attention to Jason Ruspini’s legal ramblings on Midas Oracle. — Do monitor Jason Ruspini’s portfolio of event derivatives, instead. | Midas Oracle .ORG http://www.midasoracle.org/2008/05/26/cftc-regulation-and-election-contracts/#comment-18912 Do not pay any attention to Jason Ruspini’s legal ramblings on Midas Oracle. — Do monitor Jason Ruspini’s portfolio of event derivatives, instead. | Midas Oracle .ORG Tue, 27 May 2008 10:42:05 +0000 http://www.midasoracle.org/?p=6988#comment-18912 [...] I’m kidding, for the first sentence. [...] [...] I’m kidding, for the first sentence. [...]

]]> By: Chris F. Masse http://www.midasoracle.org/2008/05/26/cftc-regulation-and-election-contracts/#comment-18911 Chris F. Masse Tue, 27 May 2008 10:25:26 +0000 http://www.midasoracle.org/?p=6988#comment-18911 @Jason Ruspini: Jason, get yourself a gravatar. http://www.gravatar.com/ @Jason Ruspini: Jason, get yourself a gravatar.
http://www.gravatar.com/

]]> By: Jason Ruspini http://www.midasoracle.org/2008/05/26/cftc-regulation-and-election-contracts/#comment-18909 Jason Ruspini Tue, 27 May 2008 03:35:25 +0000 http://www.midasoracle.org/?p=6988#comment-18909 Michael, I agree in spirit but the CFTC's realities remain. Are you saying that (some) event markets are exempt commodities, should be no-actioned on an ad hoc basis, or just ignored? I'm working with what we've got. I also appreciate the point about how history judges pragmatists, but really don't think that's relevant here. Also, by "point shaving", mostly what I had in mind was just insider trading of events falling short of resignation. Michael, I agree in spirit but the CFTC’s realities remain. Are you saying that (some) event markets are exempt commodities, should be no-actioned on an ad hoc basis, or just ignored? I’m working with what we’ve got. I also appreciate the point about how history judges pragmatists, but really don’t think that’s relevant here.

Also, by “point shaving”, mostly what I had in mind was just insider trading of events falling short of resignation.

]]> By: Michael Giberson http://www.midasoracle.org/2008/05/26/cftc-regulation-and-election-contracts/#comment-18907 Michael Giberson Tue, 27 May 2008 03:04:28 +0000 http://www.midasoracle.org/?p=6988#comment-18907 My general sense is that no candidate or campaign agent is "in control" of an election outcome with sufficient dexterity as to engage in effective point shaving.  But a contract on whether presidential primary candidate X drops out prior to the party's convention might be highly exposed to the risks that insiders could profit from non-public information..Nonetheless, my initial preference would be to let exchanges decide upon contracts offered and their definition, and let traders assess the risks involved in their trading strategies.  If exchanges think the events will not succeed because of an adverse selection problem, exchanges won't offer the contracts.  If traders judge the risk as too great, even if the contracts are offered then traders will stay away..The worst case scenario, I guess, is that a lot of traders have open offers betting in favor of a candidate staying in the race to the end, and a campaign insider learns of an imminent withdrawal and uses the information to accept the open offers before the information becomes public.  At the extreme end, the candidate herself/himself engages in the trading before informing anyone..Is there some other "much worse case scenario"?  If my example is the worst case scenario, aren't the public policy interests in preventing such activity small compared to the public policy interest in encouraging exploration of contract forms?  Having regulators decide in advance which kinds of contracts are banned because likely to be bad for traders or bad for exchanges seems more harmful than letting exchanges work these things out. My general sense is that no candidate or campaign agent is “in control” of an election outcome with sufficient dexterity as to engage in effective point shaving.  But a contract on whether presidential primary candidate X drops out prior to the party’s convention might be highly exposed to the risks that insiders could profit from non-public information..Nonetheless, my initial preference would be to let exchanges decide upon contracts offered and their definition, and let traders assess the risks involved in their trading strategies.  If exchanges think the events will not succeed because of an adverse selection problem, exchanges won’t offer the contracts.  If traders judge the risk as too great, even if the contracts are offered then traders will stay away..The worst case scenario, I guess, is that a lot of traders have open offers betting in favor of a candidate staying in the race to the end, and a campaign insider learns of an imminent withdrawal and uses the information to accept the open offers before the information becomes public.  At the extreme end, the candidate herself/himself engages in the trading before informing anyone..Is there some other “much worse case scenario”?  If my example is the worst case scenario, aren’t the public policy interests in preventing such activity small compared to the public policy interest in encouraging exploration of contract forms?  Having regulators decide in advance which kinds of contracts are banned because likely to be bad for traders or bad for exchanges seems more harmful than letting exchanges work these things out.

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