Intrade
Founders | Ron Bernstein and Sean McNamara |
---|---|
Products | trading exchange |
Website | intrade |
Intrade.com was a web-based trading exchange whose members "traded" contracts between each other on the probabilities of various events occurring. After having been forced to exclude US traders in 2012, on 10 March 2013 Intrade suspended all trading, citing possible "financial irregularities". For a time after the suspension, the intrade.com website stated that they were working on a relaunch of the site,[1] called "Intrade 2.0", but as of August 2014 it states that "It appears very unlikely now that Intrade will resume trading services in the way it had operated previously", and announced plans to close all accounts and refund monies by 31 December 2014.[needs update]
History
Intrade was founded by Ron Bernstein and Sean McNamara, a New York futures and options floor trader in 1999.
Intrade's system utilises a prediction market trading exchange which allows members to take positions (trade 'contracts') on whether future events will or will not occur. An example event is a political election, which is almost always settled in a well-defined and verifiable manner. The contract might be "Mitt Romney to win 2012 U.S. presidential election". Other possible events include financial predictions, such as "the NASDAQ Average to close higher today", or current events predictions such as "Will Adele win the Grammy Award for Best New Artist?" Intrade facilitates trading between members, charging a monthly fee,[3] but does not participate in trading itself.
Trading positions are described in the common trading nomenclature of long (will happen—bullish) and short (will not happen—bearish). The trading unit is a contract with a notional settlement value of $0 if the event does not occur or $10 if the event does occur. The contract may trade in the range of 0–100, where 1 point equals US$0.10 in value. So, if the event specified in a given contract occurs, the contract settles at 100 points or $10; otherwise, the contract settles at 0 or $0 in value. Profits and losses are calculated by tabulating the differences between where contracts are purchased against where they are either sold (at any price set by the open market between 0 and 100) or what price they finally expire at (0 or 100) when the event itself is concluded. Utilizing this contract structure, the current price of a contract can be imputed as "the market's" global opinion of the probability that the specified event will occur.[citation needed]
Because events take place over a well-defined time span and have a well defined outcome, traders can trade both before and during an event.[citation needed]
Intrade provided both real-money and play-money prediction market trading.[4] The minimum deposit for opening a real money account was US$25.00, but US$100 is recommended to "fully appreciate the trading experience".[5]
While Intrade operated legally from the Republic of Ireland, it does not comment on the legality of trading for customers in other countries.[6] In 2005, Tradesports applied to the U.S. Commodity Futures Trading Commission (CFTC) for permission to open a regulated futures exchange in the United States.[7]
In July 2008, not having an official decision, Intrade sent a letter to the CFTC 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."[8]
Due to banking regulations that came into force in 2010, American customers were prohibited from funding their accounts with credit or debit cards issued by a US bank.[9]
The 2012 US presidential election was a bellwether media event for Intrade, garnering the company high levels of web traffic (greater than 50 million monthly page views in October and November, source; Google Analytics) and hundreds of media mentions related to the accuracy of the Intrade markets and the correct market predictions of the outcomes of all US state electoral contests except Florida and Virginia.[citation needed]
On 26 November 2012, the CFTC filed a civil suit in federal district court in Washington, D.C. for unregulated trading in traditional commodities, such as gold, seeking an injunction against Intrade allowing U.S. citizens to trade on their site.[10][11] The US CFTC claimed that Intrade's operation interfered with the CFTC's role "to police market activity and protect market integrity". Shortly thereafter (though not explicitly in direct response), Intrade announced it would no longer allow U.S. customers to participate in the real-money version of the site.[12] On 23 December, Intrade closed all US-based member accounts.[13] Trading volumes suffered a dramatic decrease without participation from US customers. On 10 March 2013, Intrade suspended all trading. In its announcement, the company stated that it was investigating potential financial irregularities.[14]
Contracts
Intrade allowed 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.), entertainment (
Intrade did however operate markets on sports-related events that did not involve athletic competition, such as bids to host an Olympics. Sister site intrade.net allowed the creation of custom markets.
Beginning in 2002, Intrade offered a range of markets for political events, such as the outcomes of U.S. presidential, senatorial, and gubernatorial elections, as well as for a diversified range of international political events.[citation needed]
Disputes
While the vast majority of the thousands of markets listed have had easily verifiable outcomes, some have not, and disputes have arisen over the wording of some contracts.
In July 2006, TradeSports, (closed now, but previously related to Intrade), conceded
On 24 May 2011, it was announced that the CEO of Intrade, John Delaney, died while attempting to climb Mount Everest. Delaney died 50 meters from the summit. His body could not be recovered.[16][17]
On 3 January 2012, Intrade settled contracts related to the
- "Expiry will be based on the officially declared winner of the Iowa caucus, as reported by three independent and reliable media sources."
However, the normal process of certifying the vote count (not recount) revealed simple arithmetic errors which resulted in Santorum being declared the winner (by 34 votes) on 20 January. Intrade, having already paid out winnings to Romney supporters, maintained that its original decision had been correct, since at least three reliable media sources had reported a Romney victory.[citation needed]
Market data
Intrade offered its market data to
See also
Notes
- ^ John Stossel - Intrade 2.0
- ^ "Sport in the City" Computer Weekly. December 2001.
- ^ "Intrade Fee Structure". Archived from the original on 15 December 2011. Retrieved 23 December 2011.
- ^ Intrade Exchange Rules – The agreement
- ^ Intrade Exchange Rules – Depositing funds
- ^ "Legality of trading" topic on Intrade's GetSatisfaction board
- ^ U.S. Demand Spurs Dublin Firm's Exchange Bid," Irish Independent, 9 May 2005.
- ^ The 2008 letter to the CFTC from the Intrade CEO, John Delaney
- ^ "Deposit by Card". Intrade.com. Retrieved 27 March 2011.
If your credit or debit card was issued by a US bank then we are very sorry to have to inform you that due to US banking regulations that came into force in 2010 you will almost certainly not be able to use it on Intrade.t/deposit/card/
[permanent dead link] - U.S. Commodity Futures Trading Commission. 26 November 2012.
- ^ Philips, Matthew (11 March 2013), "What's Behind the Mysterious Intrade Shutdown?", Bloomberg Businessweek, archived from the original on 13 March 2013, retrieved 16 March 2013
- ^ "Government Crushes Innovative Online Prediction Market". Fox Business.
- ^ "ATTENTION U.S. CUSTOMERS". Intrade. Archived from the original on 29 November 2012.
- ^ "Intrade shuts amid investigation". BBC. 1 January 1970. Retrieved 11 March 2013.
- ^ "Expiry of North Korea Missile Test Contract" http://www.tradesports.com/aav2/news/news_58.html Archived 13 May 2008 at the Wayback Machine
- ^ "Climber dies after third child born". The Belfast Telegraph. 24 May 2011. Retrieved 11 March 2013.
- ^ Julie Creswell (26 May 2011). "John Delaney, Founder of Intrade, Dies at 42". The New York Times.
- ^ "Storm of Protest Forces Pentagon to Pull Plug on 'Terror Futures'," London Evening Standard, 30 July 2003.
References
- Intrade – How Does it Work?
- Intrade – Fees
- 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, 15 October 2005.
- Ben White, Web Sites Mimic Commodities Exchanges Washington Post, 23 October 2004.
- Matthew Ericson, "Page Two: July 6–12; Gambling on a Candidate's Future(s)," New York Times, 13 July 2003.
- Tom Kohn, "You can bet, literally, on when Saddam will be gone," Pittsburgh Post-Gazette, 11 February 2003.
- Donald Luskin, "Who's Behind the Bush-Futures Attacks?", National Review, 18 October 2004.
- Peter John, "Intrade offers online way for punters to play," Financial Times, 31 July 2001.