Intrade
Encyclopedia
Intrade is an online trading exchange
website. The website's members speculate on the outcomes of non-sports-related future events. Intrade was founded by John Delaney
in 2001 and acquired by Tradesports
in 2003. 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 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 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 maker
s in its benchmark markets to provide a two way price at almost all times.
Intrade provides both real money (Intrade.com) and play money (Intrade.net) prediction market trading. The minimum deposit for opening a real money account is US$25.00, but US$100 is recommended to "fully appreciate the trading experience".
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 allows the creation of custom markets.
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.
There are no fees for deposits. For check withdrawals, Intrade charges users the cost of issue (currently 4 euro). There is an additional charge of $10 if a check has already been issued that month for the account. Bank transfer withdrawals cost US$20, or $30 in some cases.
In July, 2006, TradeSports, (closed now, but previously related to Intrade), conceded that one of these contracts was problematic. The contract allowed speculation on whether North Korea would, by July 31, 2006, successfully fire ballistic missiles that would land outside its airspace. On July 5, 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).
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. Intrade supplies market data at significantly discounted fees or free to academics.
for permission to open a regulated futures exchange
in the United States.
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."
, died while only 50 metres from the peak of Mount Everest. Delaney's body could not be recovered.
Betting exchange
A betting exchange is an entity which provides "trading" facilities for retail or bookmaker customers to buy and sell contracts. Contracts are structured as binary options. Some betting exchanges may also offer CFD products...
website. The website's members speculate on the outcomes of non-sports-related future events. Intrade was founded by John Delaney
John Delaney (businessman)
John Delaney was an Irish businessman and the founder and CEO of the trading exchange website Intrade. He died at the age of 42 while attempting to climb Mount Everest—a lifelong ambition—and came within 50 metres of the summit. He is survived by his wife, two sons, and a daughter who was born...
in 2001 and acquired by Tradesports
TradeSports
Tradesports was an online trading exchange website whose members speculate on the outcomes of future sports events. Founded by John Delaney in 2000, and located in Dublin, Ireland, by 2005 it reported 50,000 members and an average monthly volume of four million trades.Tradesports' sister website,...
in 2003. 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
Prediction market
Prediction markets are speculative markets created for the purpose of making predictions...
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 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 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
Probability
Probability is ordinarily used to describe an attitude of mind towards some proposition of whose truth we arenot certain. The proposition of interest is usually of the form "Will a specific event occur?" The attitude of mind is of the form "How certain are we that the event will occur?" The...
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 maker
Market maker
A market maker is a company, or an individual, that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn. From a market microstructure theory standpoint, market makers are net sellers of an option to be...
s in its benchmark markets to provide a two way price at almost all times.
Intrade provides both real money (Intrade.com) and play money (Intrade.net) prediction market trading. The minimum deposit for opening a real money account is US$25.00, but US$100 is recommended to "fully appreciate the trading experience".
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 bosonHiggs boson
The Higgs boson is a hypothetical massive elementary particle that is predicted to exist by the Standard Model of particle physics. Its existence is postulated as a means of resolving inconsistencies in the Standard Model...
be observed?), technology (web browser market share, Google Lunar X Prize, Apple iPad unit sales), finance (DJIA
Dow Jones Industrial Average
The Dow Jones Industrial Average , also called the Industrial Average, the Dow Jones, the Dow 30, or simply the Dow, is a stock market index, and one of several indices created by Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow...
, S&P 500
S&P 500
The S&P 500 is a free-float capitalization-weighted index published since 1957 of the prices of 500 large-cap common stocks actively traded in the United States. The stocks included in the S&P 500 are those of large publicly held companies that trade on either of the two largest American stock...
, NASDAQ-100
NASDAQ-100
The NASDAQ-100 is a stock market index of 100 of the largest non-financial companies listed on the NASDAQ. It is a modified capitalization-weighted index. The companies' weights in the index are based on their market capitalizations, with certain rules capping the influence of the largest components...
, 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
Olympic Games
The Olympic Games is a major international event featuring summer and winter sports, in which thousands of athletes participate in a variety of competitions. The Olympic Games have come to be regarded as the world’s foremost sports competition where more than 200 nations participate...
. Sister site intrade.net allows 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.
Fees
Intrade charges users a flat fee of $4.99 per month. The fee is charged to all accounts, regardless of whether the account was inactive and did not execute any trades during that month. This fee structure was implemented as of January 1, 2011 and is a change from the old structure which charged fees per trade.There are no fees for deposits. For check withdrawals, Intrade charges users the cost of issue (currently 4 euro). There is an additional charge of $10 if a check has already been issued that month for the account. Bank transfer withdrawals cost US$20, or $30 in some cases.
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 that one of these contracts was problematic. The contract allowed speculation on whether North Korea would, by July 31, 2006, successfully fire ballistic missiles that would land outside its airspace. On July 5, 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
Condition precedent
Condition precedent refers to an event or state of affairs that is required before something else will occur. In contract law, a condition precedent is an event which must occur, unless its non-occurrence is excused, before performance under a contract becomes due, i.e., before any contractual...
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).
Market data
Intrade offers its market data to prediction marketPrediction market
Prediction markets are speculative markets created for the purpose of making predictions...
researchers. At one time it assisted the U.S. Department of Defense in a controversial scheme
Policy Analysis Market
The Policy Analysis Market , part of the FutureMAP project, was a proposed futures exchange developed by the United States' Defense Advanced Research Projects Agency and based on an idea first proposed by Net Exchange, a San Diego research firm specializing in the development of online prediction...
(ultimately canceled) to assess probabilities of future terrorist attacks. 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. 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.Legal status
While Intrade operates legally from the Republic of Ireland, it does not comment on the legality of trading for customers in other countries.Further activities
In 2005 Tradesports applied to the U.S. Commodity Futures Trading CommissionCommodity Futures Trading Commission
The U.S. Commodity Futures Trading Commission is an independent agency of the United States government that regulates futures and option markets....
for permission to open a regulated futures exchange
Futures exchange
A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future. These types of...
in the United States.
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."
Death of CEO
On the 24 May 2011, it was announced that the founder and CEO of Intrade, John DelaneyJohn Delaney (businessman)
John Delaney was an Irish businessman and the founder and CEO of the trading exchange website Intrade. He died at the age of 42 while attempting to climb Mount Everest—a lifelong ambition—and came within 50 metres of the summit. He is survived by his wife, two sons, and a daughter who was born...
, died while only 50 metres from the peak of Mount Everest. Delaney's body could not be recovered.