No Manipulation at Intrade

Despite speculation by Nate Silver, Justin Wolfers, and myself that some suspicious trading was happening on Intrade presidential contracts, company CEO John Delaney wants us to chickity-check ourselves:

We have carried out an extensive investigation into this matter including but not limited to...

1. A full and careful examination of the publicly available information on the trading - our exchange notably provides public free access to all time-and-sales and closing price data on all open markets.
2. A full and careful examination of all non-public information (orders, positions, accounts, IP addresses, physical addresses, customer documentation including copies thereof).
3. Communication both verbal and in writing with those involved.
4. Full and complete consideration of specific applications our Exchange Rules in light of the trading activity in question.

As a result of our investigations we would like to advise the following.

The trading that caused the unusual price movements and discrepancies was principally due to a single "institutional" member on Intrade. We have been in contact with the firm on a number of occasions. I have spoken to those involved personally.

We are satisfied that they are using our markets in good faith and in the ordinary course of their business and that there has been no contravention of our Exchange Rules. Our investigations lead us to believe that the member is using increased depth in these markets to manage certain risks.

Further, it is apparent that the cost of time in accumulating the desired positions by those "institutional" members responsible for moving the McCain market up and the Obama market down differs fundamentally to loyal "retail" members that Intrade relies on.

The Exchange views this unusual activity as an indication of the increased relevance and traction of Intrade markets as risk management tools coupled with the yet maturing state of the prediction market industry as a whole.

As our markets gain further fluency and are more broadly used to help manage risk, we expect to see other cases where single, well-financed parties accumulate large positions in short periods of time in our markets and possibly distort prices away from prices on other platforms. As funds flow between platforms gets easier, arbitrage opportunities will last for far shorter periods that is currently the case.

In any and all future similar cases, we will diligently monitor the activity, the accounts and profiles of those responsible and take whatever action is in the best interests of all exchange stakeholders.

Translation: Hedge funds have found a use for Intrade, and set their sights on one of the few bull markets around: