When there’re few trades (in this case, only 3), the last price/probability is too much dependent on the initial price set up by the exchange manager.
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Nigel, you f***ed it up. I want your apology letter posted on Midas Oracle no later than Monday morning. I want you full of contrition.
And you need to tell your traders how you’re going to interpret an “exemption”. An “exemption” is in between a “license” (or, more exactly, being subject to the CFTC’s regulation) and an outright “exclusion”. It’s in between.
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It’s not a problem with MSR, just the use of MSR. Whoever subsidized the decision markets on Intrade seems to have suffered over $1000 of losses across all those markets in January because they set the initial prices at 50% when they obviously should have been lower given the definition of the contract and democrat electoral chances:
http://www.intrade.com/index.jsp?request_operation=trade&request_type=action&selConID=565199