A mysterious InTrade forum user (could be a trader or could be John Delaney) has posted this:
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Joined: 24/01/2010 15:58:35
Messages: 1
Original thread at midasoracle.org:
So the actor has to a) not care about the transaction fee and b) have limitless margin. Intrade fits the bill for both of these. a) they don’t care about transaction fees because they are ultimately collecting them and b) if you only short when the bids are summed to over 100, it’s essentially an arb.
Until mid-April 2010, Intrade will refund market taking and expiry fees for arb trades – details here.
Some products with a single guaranteed outcome are linked for cross-margining purposes. If you collect at least $10 by shorting all three contracts for the 2012 presidential election, then you will not have any funds frozen. The contract rules will tell you if a product is not linked (e.g. 2012 republican presidential nominees).
Intrade provides an API for developing trading applications. I am running a bot to take out market imbalances and as far as I’m aware Intrade is not competing with me.
Ah.
Where’s InTrade’s disclaimer?
Obviously, if they have to outsource their market-making ability prices should not be re-printed by media outlets as indications of anything more than ETP (Exchange Traded Propaganda)
In the case of the HCR contract – why was there no “No” (failue of HCR) contract to trade side-by-side with the “Yes.” (The answer is that having these two contracts running concurrently would invalidate both contracts as it would immediately become obvious – without sufficient evidence of concurrency – that InTrade was not a bona-fide price discovery platform at all. Unlike my VST that genuinely is robust and unique – hence the patent number. Which is not to suggest that Cantor does not game my tech. both on HSX and CantorX – but that is another story).
Having only a “Yes” contract frames the market in an absurdly biased way.
At the the very least, InTrade should publish all concurrent contracts on all related exchanges and they should over “No” contracts along with “Yes” contracts.
Response to Max,
I cannot understand why you think there should be a “No” contract side-by-side with the “Yes” contract. The current “Yes” contract functions as both a “No” and a “Yes”, if you think it will expire as “Yes”, buy, and if not, sell.
This reminds me about how every so often some new user comes to the forum to complain about there being no daily dow contract to bet that it will close lower than the open. Clearly the reason for this is because you would just sell the “Dow.Close.Higher” contract. One member conducted a poll in the forums, and the result was nearly unanimous, nobody wants the Lower contracts – it wouldn’t make sense to have one.
Having double contracts would decrease liquidity among each individual one. Intrade already has a liquidity problem, and offering the “No” contracts would only compound the problem. Perhaps it would be easier for those outside of the market to analyze the associated probabilities, but for us inside, it would be absolutely absurd to offer these “No” contracts.
Saying that this frames the market in an “absurdly biased way” is a bit of an overstatement. One direction had to be chosen, and it makes more sense for a “Yes” contract than a “No” contract, as selling a “No” contract is a double negative, which could confuse users.