OPEN-SOURCE PREDICTION EXCHANGE: How Smarkets is going to eat BetFairs lunch -well, they hope.

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TechCrunch UK

There’s an interesting twist – they plan to offer an open API for people to develop their own betting applications and use the Smarkets infrastructure. Their idea is this: users don’t need knowledge of odds or experience. It’s more about speed and entertainment than sports.

Smart idea, but how will this crack the chicken-and-egg problem that every prediction exchange (betting exchange) has at inception? How will this help fighting BetFair&#8217-s network effect? What makes you think that BetFair and TradeSports don&#8217-t offer &#8220-speed and entertainment&#8221-? Do people really want to trade sports or &#8220-develop their own betting applications&#8221-? What would prevent BetFair and TradeSports to do the same?

Anyway, best wishes to UK-based Yankees Jason Trost and Hunter Morris. :-D


Smarkets – Their web framework. – PDF file

Smarkets – Open-source software they use.

Smarkets – Press release

Why I dont believe in VP prediction markets

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Because the decision to select a running mate is a decision made in secrecy, with many (personal or else) factors we are not aware of, and many things we are not fully informed about. Barack Obama and John McCain&#8217-s minds are not that open &#8212-whatever you can read in the Press from the so-called campaign insiders. That&#8217-s the typical kind of prediction markets that traders and probability seekers should not approach.

So, I won&#8217-t cover InTrade and BetFair&#8217-s VP prediction markets, here.

Taxes are the largest class of risk people dont hedge. Our Jason Ruspini (allied with InTrade) wants to change that.

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Jason Ruspini, interviewed by Bloomberg:

Taxes &#8220-are the largest class of risk people don&#8217-t hedge,&#8221- said Jason Ruspini, a New York hedge fund analyst who established the market, which began trading last week. &#8220-Hopefully this year, with this election, there will be kind of an increased interest in this kind of thing.&#8221- […] &#8220-If Democrats are perceived as having a greater chance to get in the White House these tax contracts will go up,&#8221- said Ruspini, who declined to identify his employer because the market he created isn&#8217-t related to it. &#8220-If McCain is elected they won&#8217-t go up as much.&#8221- […] Right now, the market exists only for the top marginal income tax rate. Ruspini said he plans to have secondary markets based on Social Security taxes and whether Congress can restrain the alternative minimum tax from raising levies on tens of millions of households. […] &#8220-This is such a young field at this point,&#8221- Ruspini said. &#8220-Ten years from now, it&#8217-s going to be a huge market. Whenever you have a contract where there&#8217-s a lot of hedging utility, that tends to be a successful contract in the long run.&#8221- […]

Congrats to Jason.

Go read the whole piece.

Previously: Tax Futures, “In Real Life” – by Jason Ruspini

HubDub wil redefine the play-money exchange landscape.

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In &#8220-private beta&#8221-.

So I can&#8217-t say anything.

Or, next thing, I&#8217-m a dead blogger.

As soon as you catch this post, RUSH THERE AND TAKE A VIRTUAL TOUR. Awesome. Nigel Eccles is the man. John Delaney, David Jack, Adam Siegel and Emile Servan-Schreiber can return to the locker room. Robin Hanson and Justin Wolfers are history artifacts, starting today. The whole world will look completely different after the HubDub launch.

How come nobody got that idea (news aggregation + prediction exchange) before HubDub???

CNN Political Market = soon, the Planet Earths most traded play-money prediction exchange -after HSX.

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CNN Political Market



The goal of CNN Political Market is to combine the opinions of a diverse group of people to try and predict the probability of an event occurring or the value of something. Why is this important? Because more often than not, a diverse group of people or &#8220-crowd&#8221- will generate a more accurate prediction than an individual or a small group of &#8220-like-minded&#8221- or &#8220-single-discipline&#8221- folks.

In business, politics, and culture, this can have big ramifications:
– Predictions often turn out to be more accurate than surveys and polls-
– More accurate forecasts affect how marketing dollars are spent, how many widgets should be built in the first run, etc.-
– Decision making is more democratized, giving everyone input where they may not have had it before-
– Markets can serve as on-going indicators for key performance metrics.

Frequently Asked Questions

These are answers to questions we receive on a regular basis.
Q: What if I forgot my username or password?
A: It&#8217-s easy, just click here and new information will be sent to the email address we have for you.

Markets and Trading
Q: How do the prices in a market change?
A: Markets are guided by the forces of supply and demand. Every time a user buys a share in a particular idea or outcome, that demand forces the price up a little. The more people buy, the higher the price becomes. If the price gets too high, people will do the natural, self-interested thing and sell their shares to get a profit (or sell shares that they don&#8217-t own on credit). Similarly, each time a user sells a share, the price goes back down some.

Q: My math says I can buy more shares than the system lets me. Why?
A: Remember that for each share you buy, the price goes up some. If you&#8217-re buying a lot of shares at once, the last share in your order might cost significantly more than the first.

Q: I sold a block of shares, but I got less money out of it than I thought I would.
A: Just like the market price increases you see when you purchase shares, each share you sell drives the market price for those shares down a little. If you&#8217-re selling a lot of shares, the last share you sell be worth much less than the first.

Q: I think the current price in a market is reflective of what the market is trying to predict. What do I do now?
A: The best thing to do is to hold onto your shares. If you try to sell them, the market price will start to go down and you won&#8217-t make as much profit as you could if you wait for the market to close.

Q: What is &#8220-on credit?&#8221-
A: When you sell shares on credit you are betting that the market price of a stock is going to go down instead of up. The idea is to sell shares you don&#8217-t have at a high price, and buy them back later once the market price has fallen. You get to keep the difference as profit.

Because you never know how high a price will go up, we&#8217-ve set up specific rules for selling shares on credit so you don&#8217-t get yourself in to trouble:
– You can buy back shares you bought on credit with the money in your bank.
There is a limit on how much stock you can sell on credit. You can figure out what that limit is by adding your available balance to the total value of shares you have bought. For example, if you have $10 available balance, and you also own $10 of stock, you can sell $20 of stock on credit. In other words, we try not to allow you to go in to debt by always protecting you against the worst possible scenario.

Q: How can I tell how much money I have?
A: Your balances are listed in the &#8220-total assets&#8221- box which you can find on your dashboard/portfolio. Your balance is also listed on each market trade page.

Q: How can I get more money?
A: You can earn money by trading wisely in markets. Look for good ideas that are undervalued, examine market descriptions for interesting things that others might not have noticed, or use your own unique, personal knowledge to make predictions that others can&#8217-t.

Q: What is the play money good for?
A: Status in the online trading community is based on how much money you have- just take a look at the &#8220-top traders.&#8221- The more money you have, the sooner everyone will begin to refer to you as &#8220-sage.&#8221-

Q: Can I give some of my money to another user?
A: Money is non-transferable – you must earn your own by trading.

Marketplace and Help
Q: The website looks a little funny. Is my computer supported?
A: We support the latest versions of Internet Explorer, Firefox, and Mozilla for Windows XP and 2000. For Mac OS X we support the latest versions of Safari, Firefox, and Mozilla. The application may work in alternate OSes and browsers, but we can&#8217-t make any promises.

BetFair embrace decision markets.

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Betfair has launched a series of innovative betting markets which will provide clear indications of how public opinion views the on-going debate about climate change, by allowing people to speculate on climate indices developed to track the extent (or otherwise) of global warming.

Betfair’s exchange model will create a market price for climate change related outcomes, including the HSBC Investable Climate Change Index, the ECX CFI Futures Contract, and Highest and Lowest UK Temperature. The commission that Betfair earns from operating these markets will be ring-fenced and invested in the development of technologies to tackle the wider issue of climate change.

In what is a major blow to prediction markets supporters, the Betfair press release refers to aggregating market mechanisms as &#8220-decision markets&#8221-, rather than &#8220-prediction markets&#8221–

‘Decision markets’ have historically proved to be accurate gauges of political, economic and cultural change and better forecasters of the future than opinion polls and expert forecasts. Efficient market theory suggests that these climate markets will be the best aggregation of all the available information on the subject. This is the ideal place for experts, academics, businesses and interested parties to put money behind their views on long-range forecasts.

It remains to be seen how Chris Masse responds to the Betfair announcement.

[External Links: HSBC Climate Index + Carbon Futures + Highest and Lowest UK Temperature Futures]