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Intrade is an online trading exchange website. The website's members bet on the outcomes of non-sports-related future events. Intrade was founded by John Delaney in 1999[1][2] and acquired by Tradesports in 2003.[3] Dublin-based owner Trade Exchange Network Limited also operated TradeBetX.com, which focused 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 offered only sports-related trading markets until they were closed in 2008, while Intrade.com offers only non-sports markets (politics, finance, entertainment, current events, transportation, legal, weather, pop culture, etc.).

Intrade is a prediction market which allow individuals 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 easily verifiable manner. The contract might be "Barack Obama to win 2012 U.S. presidential election." Other events include financial predictions, such as "NASDAQ Average to close higher today." Intrade facilitates trades between members, charging a monthly fee,[4] 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 where 1 point equals US$0.10 in value. 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. 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 likes to have dedicated market makers in its benchmark markets to provide a two way price at almost all times.

Intrade provides both real money and play money prediction market trading.[5] The minimum deposit for opening a real money account is US$25.00, but US$100 is recommended to "fully appreciate the trading experience".[6]

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.), entertainment (Academy Awards, American Idol, Dancing with the Stars), science (will the Higgs boson be observed?), technology (web browser market share, Google Lunar X Prize, Apple iPad unit sales), finance (DJIA, S&P 500, NASDAQ-100, gold price), but does not predict stocks or sports competitions. However, Intrade does operate markets on sports-related events that do not involve athletic competition, such as bids to host an Olympics. Sister site intrade.net (since closed) allowed the creation of custom markets.

Political contracts

Intrade has offered since 2002 the widest range 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.[7]

Fees

Service Fees

Intrade charges users a flat fee of $4.99 per month. The fee is charged to all accounts with a balance, regardless of whether the account was inactive and did not execute any trades during that month. Accounts with no balance are not charged. In addition, accounts inactive for 18 months or longer assessed a $5.00 dormant account fee which is deducted from the account's available balance. [8]

Withdrawal Fees

For customers requesting a check withdrawal, Intrade issues a banker's draft, which is similar to a Cashier's check in the United States[9]. For the first check in a given month, there is no fee[9]. However, customers are required to pay the cost to issue the check which is deducted by the bank from the amount of the withdrawal[9]. The current cost to issue a check is €4.00[9]. If an account holder wishes to make more than one check withdrawal within a calendar month, they will be charged an additional $10.00 fee for each check after the first[9]. There is no cost for standard delivery. For customers requiring expedited delivery, Intrade will ship checks via FedEx with a tracking number for a $30.00[10].

In addition to check withdrawals, account holders may withdraw funds via wire transfer. Intrade charges a $20.00 fee for each wire transfer. In addition, customers must pay any and all fees incurred during the transfer, regardless of whether those fees originate from the initiating bank, the receiving bank, or any intermediary bank. [9][10]

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 [11] that one of these contracts was problematic. The contract allowed speculation on whether North Korea would, by 31 July 2006, successfully fire ballistic missiles that would land outside its airspace. On 5 July 2006 the North Korean government claimed a successful test launch that would have satisfied the prediction, a launch widely reported by world media. Tradesports declared that the contract's conditions had not been met, because the US Department of Defense had not confirmed the action, and this confirmation was specifically required by the contract. (Other government sources had confirmed the claim, but these were not the sources referenced in the contract.) Traders considered this to be in strict compliance with the stated rule but contrary to the intention of the market (which was to predict the launch event, and not whether the US Defense Department would confirm it).

On 3 January 2012, Intrade settled contracts related to the 2012 Iowa caucus in favor of bettors supporting Mitt Romney, on the basis that Iowa Republican Party chairman Matt Strawn (incidentally a Rick Santorum supporter) had declared Romney to be the winner by a narrow margin of 8 votes, adding that there would be no recount. The contracts specified that

"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 (though it is debatable whether they reported him to be the "officially declared winner"). The discrepancy did not affect the allocation of delegates; however, it may have affected the momentum of the two candidates concerned.[12]

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.[13] Intrade supplies market data at significantly discounted fees or free to academics.

Customers

Unlike most other betting exchanges, Intrade does not prohibit customers from particular locations (e.g. US). Rather, the site requires that members declare that it is not illegal for them to use the exchange.[citation needed] However, due to banking regulations that came into force in 2010, American customers are prohibited from funding their accounts with credit or debit cards issued by a US bank.[14]

While Intrade operates legally from the Republic of Ireland, it does not comment on the legality of trading for customers in other countries.[15]

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.[16]

In July 2008, not having an official decision, Intrade sent a letter to the Commodity Futures Trading Commission 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."[17]

Death of CEO

On the 24 May 2011, it was announced that the founder and CEO of Intrade, John Delaney, died while only 50 meters from the peak of Mount Everest. Delaney's body could not be recovered.[18][19]

See also

Notes

  1. ^ Daniel Gross, "John Delaney, Founder of Intrade, Dies at 42," New York Times, May 26, 2011.
  2. ^ [1]
  3. ^ Grainne McLoughlin, "Betting on Success," Sunday Business Post, January 25, 2004.
  4. ^ Intrade Fee Structure
  5. ^ Intrade Exchange Rules - The agreement
  6. ^ Intrade Exchange Rules - Depositing funds
  7. ^ Williams, Leighton Vaughan. "How to Forecast an Election (And How To Win One!)." http://www.pollingreport.com/lvw_bet.htm
  8. ^ "Intrade Fees". Intrade. Retrieved 15 October 2012.
  9. ^ a b c d e f "Intrade Rules". Intrade. Retrieved 15 October 2012.
  10. ^ a b "Withdraw Funds from Your Account". Intrade. Retrieved 15 October 2012.
  11. ^ "Expiry of North Korea Missile Test Contract" http://www.tradesports.com/aav2/news/news_58.html.
  12. ^ http://bb.intrade.com/intradeForum/posts/list/493046.page#545717
  13. ^ "Storm of Protest Forces Pentagon to Pull Plug on 'Terror Futures'," Evening Standard, July 30, 2003.
  14. ^ "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/
  15. ^ "Legality of trading" topic on Intrade's GetSatisfaction board
  16. ^ U.S. Demand Spurs Dublin Firm's Exchange Bid," Irish Independent, May 9, 2005.
  17. ^ The 2008 letter to the CFTC from the Intrade CEO, John Delaney
  18. ^ http://www.belfasttelegraph.co.uk/news/local-national/republic-of-ireland/climber-dies-after-third-child-born-16003727.html
  19. ^ Julie Creswell (May 26, 2011). "John Delaney, Founder of Intrade, Dies at 42". The New York Times.

References

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