When Paul Milgrom recommended me to replace him as a co-editor of the American Economic Review, a post I held over nine years, one of the attributes he gave as a justification for the recommendation was that I am opinionated. At the time, I considered “opinionated” to mean ‘holding opinions without regard to the facts,’ and indeed dictionary definitions suggest ‘stubborn adherence to preconceived notions.’ But there is another side to being opinionated, which means having a view. It is a management truism that having a vision based on false hypotheses is better than a lack of vision, and like all truisms it is probably false some of the time, but the same feature holds true in editing: the editor’s main job is to decide what is published, and what is not. Having some basis for deciding definitely dominates the absence of a basis. Even if I don’t like to think of myself as “obstinate, stubborn or bigoted,” it is valuable to have an opinion about everything.

Edifying Editing – (PDF file) – by R. Preston McAfee

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Resources For Economists (The American Economic Association’s directory) about CFM:

This site offers a variety of material for those interested in “prediction markets” (markets where participants trade instruments whose price reflects the probability of future events). While somewhat opinionated, many will likely find it useful for its breadth of coverage.

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If the answer to that question is “no”, then do scan-read that interesting New York Times story about bloggers and blogging.

Yes, that NYT story was written by… a blogger (who usually blogs at ValleyWag) —if you were wondering.

Yes, many blogs are “opinionated” —as you can see in the picture below.

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As I told you yesterday, I have updated the “EXCHANGES” and “SOFTWARE” listings on Midas Oracle.

I am getting good feedback, thanks.

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Today, I am attempting to put any of these labels next to each exchange or software package:

• CDA = Continuous Double Auction
• MSR = Market Scoring Rules
• DPMM = Dynamic Pari-Mutuel Market
  
• SR = Scoring Rules
• AMM = Automated Market Maker

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Would you be so kind as to review my 2 listings and tell me where I fu**ed it up, please? Thanks. Appreciated. Will make up to you.

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- I am still waiting for some feedback from some people I have contacted for details.

- Is there a resource missing? Any idea?

- I am not even sure I should use the plural for “MSR” and “SR”. Any idea?

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I have updated the “EXCHANGES” and “SOFTWARE” listings on Midas Oracle.

1. In the exchanges listing, I put the exchanges that apply the prediction market approach ahead of the others. And I put in bold the very liquid exchanges. Agree?
2. In both listings, I retained only the serious endeavors. Any missing items? – [The CFM lisiting of prediction exchanges is more exhaustive.]
3. Are there other listings on the Net that I should list there?
4. Any further ideas?
5. In passing, please note that the MO and CFM listings are the only ones that have been maintained consistently over the years (since 2003, for CFM) on the Internet.

July 6th, 2008

Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st St. NW
Washington D.C. 20581

Attention:
Office of the Secretariat- secretary@cftc.gov

Reference:
Concept Release on the Appropriate Regulatory Treatment of Event Contracts
73 FR 25669

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My name is Chris F. Masse, and I’m the publisher of CFM (a vertical portal to prediction markets, which is the only one I know of that lists extensively the URLs of all the world’s play-money and real-money prediction exchanges)

http://www.chrisfmasse.com/

and Midas Oracle (a group blog on prediction markets, which is the most popular resource on this topic).

http://www.midasoracle.org/

I’ve been covering the prediction market industry since 2003 (when the brouhaha caused by the Policy Analysis Market attracted the attention of many). I would like to give my input to the CFTC on the subject of real-money prediction exchanges.

First of all, let me say that I welcomed:

#1. The CFTC’s decision to investigate and approve HedgeStreet’s application as a DCM in 2003 and 2004 (in spite of the opposition of the Chicago Mercantile Exchange);

http://www.hedgestreet.com/abouthedgestreet/pressreleases/pressrelease_1.html
http://www.hedgestreet.com/faq/
http://www.financial-spread-betting.com/hedgestreet-application.pdf
http://www.cftc.gov/files/submissions/comments/comdcm038cme.pdf

#2. The CFTC’s decision to publish a concept release on “event markets” in May 2008 (73 FR 25669).

http://www.cftc.gov/lawandregulation/federalregister/proposedrules/2008/e8-9981.html

Just a technical note, before I give you my thoughts. In the following, I call “prediction market” the specific market where one particular event derivative is traded. (For instance, the “Barack Obama will be elected US President in November 2008″ prediction market.) And I call “prediction exchange” the general marketplace where many prediction markets (on political elections and other events) are traded. (Hence, I call HedgeStreet a “prediction exchange”).

Please, allow me to give you my thoughts on the subject of real-money prediction exchanges:

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ABOUT DISPERSED INFORMATION PRICED IN EVENT DERIVATIVE MARKETS, EXCLUDED COMMODITIES, DCMs, AND EXTENDING THE COMMENTING PERIOD ON THE CFTC’s CONCEPT RELEASE ON “EVENT MARKETS”.

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#1. I fully agree with the point #2 made by professor Vernon Smith in his comment (CL01) to the CFTC.

http://www.cftc.gov/stellent/groups/public/@lrfederalregister/documents/frcomment/08-004c001.pdf

The information aggregation mechanism that constitutes the essence of each prediction market (for instance, the “Barack Obama will be elected US President in November 2008″ prediction market), and the objective probabilistic predictions generated by all these information aggregation mechanisms, are of high social utility.

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#2. I fully agree with HedgeStreet in their comment to the CFTC (CL12) that political elections qualify as “excluded commodities”.

http://www.cftc.gov/stellent/groups/public/@lrfederalregister/documents/frcomment/08-004c012.pdf

The point made by HedgeStreet about economic consequences, risk management and hedging is extremely important with regards to:
- the future revenues of the for-profit, commercial companies who would be operating the real-money prediction exchanges on political elections (since hedging-oriented derivative markets experience much more volumes than speculative-only betting markets);
- the financial innovations, which would be created by this process, and whose benefits will, on the long term, spread throughout society (just like what has happened with the traditional derivatives).

However, I notice that HedgeStreet does not state specifically whether the topics other than political elections (mentioned in the CFTC’s concept release on “event markets”) qualify, too, as “excluded commodities”.

This issue is the cornerstone of the discussion on “event markets”. In the concept release, the CFTC mention many other prediction markets than those about political elections. I saw only one comment (from Jason Ruspini, CL11) that elaborates in detail about non-political “event markets” —as of Sunday, Juy 6th, 2008, one day before the deadline for the commenting period.

http://www.cftc.gov/stellent/groups/public/@lrfederalregister/documents/frcomment/08-004c011.pdf

Hence, I believe that the CFTC do not (as of this Sunday) have enough pieces of external opinions about this important issue to make their determination about the regulatory status of “event markets”.

I am asking the CFTC to extend the deadline to September 7th, 2008.

I believe that since the most interesting comments (other than Vernon Smith’s one, which appeared the first in May 2008) were made the last week preceding the July 7th deadline, there wasn’t enough time for the previous commenters or some other commenters to agree or disagree with those recent comments.

On top of all that, I understand that some people and organizations might well submit their comment on Sunday, July 6th, 2008 —the day before the deadline for the closure for the comments. I know that law professor Tom W. Bell will do so. It is rumored that 2 prediction exchanges will do so, too. It will be impossible for other commenters to assess those last comments, and give their opinion about those to the CFTC.

I believe that more people and organizations would come forward in the coming 2 months with interesting opinions about the “excluded commodities versus exempt commodities” debate (or some say, the “jurisdiction vs. exemption” debate), which is, as I understand it, the cornerstone of the CFTC’s concept release on “event markets”. Indeed, some business media organizations I know of will publish news articles about this debate, after the July 7th deadline. Hence, many more people will be drawn in the conversation about “event markets”, and we will all benefit from their input.

As I said, one one hand, the debate needs more external comments from people arguing that non-political events are “excluded commodities”.

On the other hand, the debate needs more external comments from people arguing that about the “exempt commodities”, “ECMs”, or “no-action letter” points of view. The American Enterprise Institute’s public petition of May 2008, the concept release of May 2008, and the comments sent to the CFTC published on the CFTC website as this Sunday, do not give many legal details about this side of the argument.

Pushing the deadline to September 7th, 2008 will allow another round of informal and formal discussions between the two sides of this important issue.

Already, one commenter (Jason Ruspini) is on the record publicly saying that, had he read the HedgeStreet’s comment to the CFTC, he would have put more emphasis on some of his arguments.

http://www.midasoracle.org/2008/07/05/my-response-to-the-cftc-on-event-contracts/

It’s for all those reasons that I am asking the CFTC to extend the deadline to September 7th, 2008.

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#3. I fully agree with HedgeStreet in their comment to the CFTC (CL12) that the DCMs (and especially a non-intermediated DCM like HedgeStreet) should be allowed to operate prediction markets on political elections, as discussed by the CFTC’s concept release of May 2008.

As I said above, not enough commenters have addressed the specific issue of how the non-political “event markets” should be regulated (or semi regulated, thru the “exemption” way). Hence, I can’t see how the CFTC can’t reach a wise decision on the issue of which type of “event markets” should be offered by which type of derivative exchanges (DCMs, ECMs, or exchanges that are granted a “no-action” letter).

Again, I am asking the CFTC to extend the deadline to September 7th, 2008.

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Thanks for listening,

Chris F. Masse
Panorama B, Green Side
305, avenue Saint Philippe
Les Templiers, Sophia–Antipolis
06410 Biot, Alpes-Maritimes
France, European Union

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RELATED POSTS:

- Chris Masse’s second comment to the CFTC on “event markets” (prediction markets)

- What the CFTC is asking.

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[...] Hillary Clinton is more and more likely to become the next President of the United States. The price of her nomination contract on Intrade has jumped to the 60 area, meaning she has a 60 percent chance of winning the nomination. No one else is even close. The market thinks that Bill Richardson is likely to be her running mate. Speculators think that this ticket will win the election, although they are not as sure of that. They are very sure that Democrats will retain both Senate and House control. [...]

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BetFair – Hillary Clinton as the Democratic Presidential Nominee -

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BetFair – Winning Party: Democratic -

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BetFair – 2008 Election – Female President -

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NewsFutures – Hillary Clinton will be the Democratic Presidential Nominee in 2008.

© NewsFutures

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NewsFutures – A Democrat will be elected President in 2008.

© NewsFutures

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External Link: CFM, the vertical portal to prediction markets

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Conservative (but not neo-con) blogger Steve Bainbridge (sitting in for Andrew Sullivan) at The Daily Dish (one of the most popular blogs on US politics):

Democratic nomination [on InTrade-TradeSports]: Hillary is running away with it (the last price on her contract was 54). Sounds right to me.

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BetFair – Hillary Clinton as the Democratic Presidential Nominee -

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BetFair – Winning Party: Democratic -

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BetFair – 2008 Election – Female President -

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NewsFutures – Hillary Clinton will be the Democratic Presidential Nominee in 2008.

© NewsFutures

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NewsFutures – A Democrat will be elected President in 2008.

© NewsFutures

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External Link: CFM, the vertical portal to prediction markets

#1. I am in possession of the URL of Tyler Cowen’s secret blog.

#2. However, nobody did rat on Tyler Cowen. And nobody did send me the URL, as such. A somebody sent me an e-mail, using a pseudonym and a forged e-mail account, hinting me about specific Google queries I should perform to land directly on Tyler Cowen’s secret blog. (Bingo!) My anonymous correspondent said that he/she weighted the moral problematic of selling Tyler Cowen down the river, but concluded that:

[...] I didn’t violate an agreement with Prof. Cowen in revealing this site, because I have not bought his book or emailed to him seeking the address.

RELATED NOTE: Today, via Tech Crunch, we are informed that The New York Times has discovered and unveiled the name of the anonymous writer who blogs at The Secret Diary of Steve Jobs, a very popular and hilarious tech business blog. It turns out the fake Steve Jobs blog is written by a Forbes editor, Daniel Lyons. How did the New York Times journalist uncover the truth?

[...] The book, in part, led to Mr. Lyons’s unmasking. Last year, his agent showed the manuscript to several book publishers and told them the anonymous author was a published novelist and writer for a major business magazine. The New York Times found Mr. Lyons by looking for writers who fit those two criteria, and then by comparing the writing of “Fake Steve” to a blog Mr. Lyons writes in his own name, called Floating Point (floatingpoint.wordpress.com). [...]

My advice to anybody with a secret blog:

• Do forbid the search engines to index your secret blog.
• Beware your writing patterns.
• Don’t drop any clues.

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Pssttt… Does somebody know who the hell hides behind the Hopefully Anonymous blog??

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TYLER COWEN – Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist.

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Tyler Cowen of Marginal Revolution

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Photo: Chris Buck

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External Link: CFM, the vertical portal to prediction markets