Intrade

Intrade is an online trading exchange website whose members speculate on the outcomes of non-sports-related future events. Intrade was founded in 2001 [Daniel Gross, "Polls say Kerry. Futures say Bush," "New York Times", August 8, 2004.] and acquired by Tradesports in 2003Grainne McLoughlin, "Betting on Success," "Sunday Business Post", January 25, 2004.] . Dublin-based owner Trade Exchange Network Limited also operated TradeBetX.com, which focuses on European interests. As of January 1, 2007, Trade Exchange Network divested its interests in Tradesports and TradeBetX.com to a newly formed company, TradeSports Ltd. These two websites now offer only sports-related trading markets, while Intrade.com handles all non-sports markets (politics, finance, pop culture, etc.).

Introduction

Intrade offers prediction markets, which allow individuals to take positions on whether future events will or will not occur. The most common examples include sports events, which are almost always settled in a well-defined and easily verifiable manner. Other events include financial predictions, such as "NASDAQ Average to close higher today". Intrade facilitates trades between members, charging varying commissions and fees on trades, but does not participate in trading itself.

Trading positions are provided in the common nomenclature of long (will happen) and short (will not happen). The trading unit is a contract with a notional settlement value, typically $10, and the contract may trade in range of 0-100. If the event specified in a given contract occurs, the contract settles at 100 points; otherwise, the contract settles at 0. Thus, the current price of the contract can be imputed as the market's global opinion of the probability that the specified event will occur.

Because most events take place over a well-defined time span, traders can trade both before and during an event. The exchange makes contractual agreements with market makers, who promise to offer two-sided markets in certain contracts in exchange for paying lower fees.

Intrade provides both real money and play money prediction market trading [ [https://www.intrade.com/jsp/intrade/help/exchange-rules.html#agree Intrade Exchange Rules - The agreement] ] . The minimum deposit for opening a real money account is US$25.00, but US$100 is recommended to "fully appreciate the trading experience" [ [https://www.intrade.com/jsp/intrade/help/exchange-rules.html#account Intrade Exchange Rules - Depositing funds] ] .

Contracts

Intrade allows bets on a wide range of future outcomes: political events (in the US, India, Germany, Israel etc.), climate change, current events (bird flu, earthquakes etc.), academy awards, science (e.g. will the Higgs boson be observed?), technology (web browser market share, Google Lunar X Prize), finance (DJIA, S&P 500, NASDAQ-100), but does not predict stocks or sports events. Sister site [http://intrade.net intrade.net] allows the creation of custom markets.

Political contracts

Intrade/Tradesports has offered a number of markets for political events, such as "George W. Bush to win 2004 US Presidential Election".

In the 2004 presidential election, the market favorite won the electoral vote in every state. This occurred when, even as late as election day, many pollsters and analysts were predicting a John Kerry victory. In Florida, a number of polls put Kerry ahead in that state, or said the race was too close to call. The betting markets, however, correctly and consistently showed Bush would win Florida comfortably. [Williams, Leighton Vaughan. "How to Forecast an Election (And How To Win One!)." http://www.pollingreport.com/lvw_bet.htm]

Fees

Intrade does not charge trading fees for orders that do not get filled immediately ("price makers"). For orders that are immediately matched ("price takers"), Intrade charges US$0.03 for "extreme" prices (0-5 and 95-100) and US$0.05 for all other prices. The expiration fee is US$0.10 for positions. There is no expiration fee for positions. Orders cannot be modified, but there are no cancellation fees.

There are no fees for deposits. Withdrawals by check are free twice per 30 days, after which they cost $10. Bank transfer withdrawals cost US$20, or $30 in some cases [ [https://www.intrade.com/jsp/intrade/help/general.html#account Intrade DEPOSIT / WITHDRAWAL] - "The $10 admin fee may also apply to bank transfer withdrawals."] . Credit card withdrawals are limited to the amount deposited using the credit card.

Disputes

While most of the contracts have had easily verifiable outcomes, some have not, and disputes have arisen over the wording of some contracts.

In July, 2006, Tradesports conceded ["Expiry of North Korea Missile Test Contract" http://www.tradesports.com/aav2/news/news_58.html.] that one of these contracts was problematic. The contract offered traders to speculate on whether North Korea would, by July 31, 2006, successfully fire ballistic missiles that would land outside its airspace. This appeared to take place on July 5, 2006: the North Korean government claimed the test was successful, and it was widely reported by world media. Some traders had argued that the event did in fact occur, but Tradesports disputed this position, noting that while many government sources had confirmed the action, the US Department of Defense had not, which was the condition noted in the contract. Traders considered this a disingenuous response, noting that Tradesports had chosen a US military source which might well be biased to refuse any comment as a matter of policy alone.

Market data

Intrade offers its market data to prediction market researchers. At one time it assisted the U.S. Department of Defense in a controversial scheme (ultimately canceled) to assess probabilities of future terrorist attacks. ["Storm of Protest Forces Pentagon to Pull Plug on 'Terror Futures'," "Evening Standard", July 30, 2003.]

Customers

Unlike Betfair and Betdaq, older trading exchanges, Intrade accepts customers from all addresses if the customer certifies that they can join the exchange.

Further activities

In 2005 Tradesports applied to the U.S. Commodity Futures Trading Commission for permission to open a regulated futures exchange in the United States. ["U.S. Demand Spurs Dublin Firm's Exchange Bid," "Irish Independent", May 9, 2005.]

In July 2008, not having an official decision, Intrade sent a letter to the Commodity Futures Trading Commissions asking for clarification of the legal status of intrade.com and its executive leadership in the United States, saying "While Intrade serves a global community and has registered members from 162 countries, our 82,000 plus membership are predominantly resident in the United States ... it is perversely unclear as to whether Intrade, and indeed myself, are considered persona gratis by the United States." [The 2008 [http://www.cftc.gov/stellent/groups/public/@lrfederalregister/documents/frcomment/08-004c014.pdf letter] to the CFTC from the Intrade CEO, John Delaney]

Notes

References

* [https://www.intrade.com/jsp/intrade/help/howitworks.html Intrade - How Does it Work?]
* [https://www.intrade.com/jsp/intrade/help/general.html#fees Intrade - Fees]
* [https://www.intrade.com/jsp/intrade/help/exchange-rules.html#withdraw Intrade - Withdrawing funds]

*Tim McLaughlin, "Tired of betting on Wall Street? Web site turns events, even Cardinals playoff chances, into futures trading," "St. Louis Post-Dispatch", Oct. 15, 2005.
*Ben White, [http://www.washingtonpost.com/wp-dyn/articles/A55599-2004Oct22.html Web Sites Mimic Commodities Exchanges] Washington Post, Oct. 23, 2004.
*Matthew Ericson, "Page Two: July 6-12; Gambling on a Candidate's Future(s)," New York Times, July 13, 2003.
*Tom Kohn, "You can bet, literally, on when Saddam will be gone," "Pittsburgh Post-Gazette", Feb. 11, 2003.
*Donald Luskin, "Who's Behind the Bush-Futures Attacks?", National Review, Oct. 18, 2004.
*Peter John, "Intrade offers online way for punters to play," Financial Times, July 31, 2001.

ee also

*TradeSports
*Iowa Electronic Markets
*The Wisdom of Crowds

External links

* [http://www.intrade.com Intrade.com]
* [http://www.intrade.net Intrade.net - user-made markets]