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Market Manipulation   Thank God for Irony
Sep 25 2008 11:20AM EDT

Intrade Statement on Trading Discrepancy

After questions were raised here and elsewhere about the discrepancy between Intrade prices and those of other prediction markets over the outcome of the presidential elections, the company issued this statement (emphasis mine):

Periodically we become aware of differences between the market prices on some of our markets with the same markets on other platforms.

Typically these differences are small, and rarely after accounting for transaction costs do they offer significant $ arbitrage opportunity.

Currently there exists a larger than usual difference between Intrade and others on some of the 2008 US presidential election markets, particularly Barak Obama and John McCain.

It is unclear what caused these particularly discrepancies. It has been suggested that arbitrage opportunities persisting for any meaningful period of time is a sign of a young industry.

I also called up Chad Rigetti, Intrade's VP of business development for some further insight. He added, plausibly, that the growing popularity of Intrade this election cycle means there are more eyes looking for discrepancies:

"The attention that our markets have gotten over this election cycle has been up, in terms of volume, by a factor of eight over the last election" in 2004, Rigetti said. So far, there's been over $18 million bet on the Obama, McCain, and Clinton presidential contracts combined.

There's no doubt that prediction markets are slowly creeping into the mainstream. A surprising number of media outlets reported on Intrade's bailout contract showing the probability that the $700 billion Treasury package will pass (which is right now 91 percent).

As for the suspicious trading patterns identified by Nate Silver yesterday, Rigetti had no comment.

In other Intrade news, they have a new market on whether the presidential debate will take place tomorrow or not after John McCain tried to beg out. According to the traders that have bet so far, the Republican nominee better start preparing:



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