Here’s the most likely scenario as to what happened here:
Somebody had a decent short position. Say they had about 65 shares (the volume bars indicate that this was likely a < 100 share transaction, ie, < $5 worth of commissions for Intrade, so mentioning commissions / greed as a motivator is pure ignorance). They wanted to put up a buy of 65 shares at say 5%, so that if the price ever dips that low, they can close their short position and wind up with a nice profit. And then, big mistake, they hit sell instead of buy. The market plummets. Mystery solved. It’s called human error.
More believable than a one-time occurrence of market manipulation with no clear purpose, in my opinion.
This is BS. There were several small trades that took the price down. They did it in the middle of the night, when there would have been few traders to take advantage of the situation.
I think it is far more likely that it was done on purpose to allow a sleepy-eyed journalist to make a quick report about how the HCR bill was falling apart.
(not that I’m a conspiracy theorist, or anything like that)…
Has anybody found a report that actually uses the deflated Intrade price on Mar 16?
Some bloggers and Joe Weisenthal of Business Insider did spot that alleged manipulation attempt.
Prof Koleman Strumpf, years ago, used a bot to send weird trades to Iowa Electronic Markets, for his paper on manipulation. Could be one suspect.
Another suspect could be a Max Keiser fanboy, who would make the point that InTrade is easily manipulable.
My question is, was there any report in the media using the deflated number to imply that the bill may not pass? This would be the purpose of the alleged manipulation, no?
But if someone were to make such a mistake on Intrade, they would get a warning message asking if they were sure they wanted to sell at a price significantly lower than the bid.
I don’t see why whether the move was reported on, in retrospect, is really relevant.
I’m an Occam’s Razor guy, but enough things line up here and it smells bad. The Obamacare contract seemed to function well, overall, though. It’s outrageous that anyone could claim that it was a market failure. These days, you just say anything anti-market and people nod their heads.
Marcus, that is what I always said that it was a “manipulation attempt”. And that’s why I think it was somebody who either was making the point that InTrade is easily manipulable (see Max’s stuff) or was experimenting with attempting at manipulating InTrade for research purpose.
Yes Jason, you make a good point, they would get an error message. So it probably is not what I proposed.
I still would think it is more likely to be some trader misinterpreting some information and going off the deep end, rather than manipulation, but there is really no way to know. I hadn’t thought that there could be people who would benefit from showing that such a market is easily manipulated, but Chris has mentioned some possible motives.
Prof Koleman Strumpf’s paper on prediction market manipulation (Iowa Electronic Markets) is here:
http://www.unc.edu/~cigar/
Manipulating Political Stock Markets: A Field Experiment and a Century of Observational Data (with P. Rhode).
http://www.unc.edu/~cigar/papers/ManipIHT_June2008(KS).pdf
Trading document for Iowa Electronic Market field experiment
http://www.unc.edu/~cigar/papers/iowa.strategy.2b.pdf