I’ve been watching Intrade somewhat manically during the US election cycle, and this morning there was an intriguing message from the CEO about some suspicious-looking trading which caused McCain’s price to temporarily leap and Obama’s to temporarily decline. Here’s what John Delaney, the CEO, had to say:
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.
Interesting, no? Because it rather suggests that either “an institution” is trying to get McCain’s price up out of the shitter it’s in, or somehow Intrade is being used to “manage risk”. Which sounds oddly like “hedging” to me. Will we suffer a “prediction crunch” somewhere down the line as a result?