On the ground of insider trading.
Keywords: CFTC &- Cantor Exchange.
The Motion Picture Association Of America (MPAA) comes out as fiercely against movie business futures.
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Tag Archives: event derivatives
The UK political prediction markets are starting to get fun.
The British Republicans (“-the Tories”-) have dipped a bit more at BetFair, yesterday, and everybody is wondering why. (See the first comment in the second link.) Expect Max Keiser to weight in. We are going to have fun this spring, I kind of feel that in the air. 
UPDATE: Bad poll for the Tories.
The Real Arithmetic Of The Health Care Reform
The Real Arithmetic Of The Health Care Reform –- NYT –- by a former CBO director.
Required reading for Paul Hewitt.
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ADDENDUM
More info on health care reform on Memeorandum, Politico and Slate.
In 1965, Congress said Medicare would cost $9 billion by 1990. In reality, it cost $67 billion -seven times more than the prediction.
Nate Silver: InTrade probability on ObamaCare is quite right.
I’-m not sure if you should particularly care about the little 5 or 10 point hedges (usually to the pessimistic side) that I’-ve periodically been recommending around the Intrade contract on the chances of reform passing. Even if you staffed a whole room full of the smartest vote-counters, modelers and analysts and had them work 24/7 on trying to beat the Intrade contract, I’-m not sure if they could come up with anything sufficiently rigorous to provide them with a real advantage. (That doesn’-t necessarily mean the market is “-efficient”-, but we’-ll save that conversation for another day.) But for what it’-s worth, the Intrade contract, which is trading at 75 percent right now, now looks about right to me or perhaps even a hair pessimistic.
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ADDENDUM
More info on health care reform on Memeorandum, Politico and Slate.
Wall Street 2: Money Never Sleeps. -> September 24, 2010
Wall Street 2 @ HSX –-> Quite high flying.
The first trailer is hilarious:
About Wall Street 2:
Wall Street 1:
Frank Sinatra, “-Fly Me To The Moon”-:
Cantor Exchange in the New York Times
Richard Jaycobs uses the adjective “-tremendous”-. But here’-s what the journalo says:
But buyers beware: if “Avatar” is any indication, the public isn’t always so wise about Hollywood fortunes. Most users of HSX.com predicted a flop, and if those users had placed real money on the Cantor exchange, they would have taken a serious hit.
Paul Krugmans excellent definition of the prediction markets
Betting markets don’t have any mystical power, but they do summarize conventional wisdom pretty well- […]
E-mail confidentially to tell me the names of the economists who over-hype the prediction markets.
Vernon Smith is bullish on event derivative markets (a.k.a. prediction markets).
Vernon Smith (via):
So far as new applications of derivatives markets I think one possibility is we may see more people making, creating derivatives markets, betting markets on policy, public policy outcomes. We’-ve already seen that with regard to the Federal Reserve. There is a market now in which people are able to make, take positions on the likelihood of a change in the Federal Reserve Bank policy at their next meeting of the Federal Open Market Committee, so and these markets are concerned with the question of what the Federal Reserve Bank rate will be set at. So I think we may very well see more of these kinds of markets and this could very well provide some indication of how the participants in these markets evaluate some of the policy proposals that governments are making.
Watch the video (download this post if your feed reader does not show it to you):
InTrade CEO John Delaney refused to improve the fairness of the trading on his Ireland-based event derivative exchange.
InTrade —- US.GOVT.HEALTHPLAN.DEC09
One InTrade trader, in October 2009:
The four re-definitions that have (so far) been necessary during the 3-month life of the US.GOVT.HEALTHPLAN.DEC09 contracts have brought to my attention that Intrade, to the best of my knowledge, does nothing to notify members that contracts they own have been “-clarified”-. It may be coincidence that volume on this contract spiked upward on July 29, Septeber 5 &- 10, and October 9 following rule changes on July 28, September 4 &- 9 and October 9. I suspect, however, that some members were aware of the rule changes while others with open orders found out about them later. While avoiding such ambiguous contracts would be preferable, some system should be in place to ensure that the unexpected need to revise contract definitions does not provide certain members with an unintended advantage.
Among the possible changes that I feel would improve this situation are the following:
1) Post a notification in the “-News”- whenever existing contract definitions are changed.
2) Notify all members with current positions and/or orders in a given contract whenever rule changes are posted.
3) Halt trading for some period of time after each change to allow members equal opportunity to respond to these changes, rather than providing an advantage to anyone who might look back at the contract specs or read their email first, including anyone who might know to look for a change after requesting the clarification from Intrade.
4) Add an asterisk or other indicator beside the contract summary on the trading screen, so that members interested in that contract will know that the contract definition has been changed. Ideally, the date of this revision should be included.
5) Add whatever changes among the above are instituted to Rule 1.7.
Changes 1), 2) and 5) seem like common sense to me, but perhaps others will disagree. In any case, I look forward to other exchange members’- comments on all of these suggestions.
The same trader, in December 2009:
Well, six weeks have passed since Mr. Delaney’-s assurance that this issue would be addressed “-ASAP”-. Unless I have somehow missed being notified of the policy change , it seems clear that the status quo is fine by management.
All I can do to attempt to encourage Intrade to take seriously the ambiguities in certain contracts is:
1) liquidate all my positions in such contracts,
2) avoid trading any potentially ambiguous contracts,
3) attempt to warn other traders about contracts that may be potentially ambiguous.
In particular, I will certainly stay away from any contracts involving U.S. legislation.
I could instead try to anticipate specific improvements that would help minimize ambiguities. However, if Intrade management cannot be bothered to address this issue even in a broad way, I think that it would be counterproductive for me to apply the occasional Band-aid. Discouraging other traders from becoming entangled seems more productive.