TradeSports

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Tradesports is an online trading exchange website whose members speculate on the outcomes of future events. Founded by John Delaney in 2000,[1] and located in Dublin, Ireland, by 2005 it reported 50,000 members and an average monthly volume of four million trades.[2]

Tradesports' sister website, Intrade.com (founded in 2001[3] and acquired by Tradesports in 2003[2]), is a prediction market for all non-sports-related events. 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.).

Contents

Introduction

Tradesports 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." Tradesports 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 Tradesports platform is especially suited for trading live sporting events while the event is taking place ("in-play"). On most days there are several games that are available "in-play" and have guaranteed liquidity between plays from independent market makers. The exchange makes contractual agreements with market makers, who promise to offer two-sided markets in certain contracts in exchange for paying lower fees.

Political contracts and disputes

Tradesports has offered a number of markets in predictions on political events, such as "George W. Bush to win 2004 US Presidential Election." While most of these contracts have had easily verifiable outcomes, some have not, and disputes have arisen over the wording of some contracts.

In July, 2006, Tradesports conceded [4] 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

Tradesports offers its market data to prediction market researchers. At one time it assisted the U.S. Department of Defense in a controversial scheme (ultimately cancelled) to assess probabilities of future terrorist attacks.[5]

Customers

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

Further activities

In 2005 Tradesports applied to the Commodity Futures Trading Commission for permission to open a regulated futures exchange in the United States.[6]

Notes

  1. ^ Liam Halligan and Philip Carter, "A Market in Mayhem," Sunday Telegraph, April 18, 2004.
  2. ^ a b Grainne McLoughlin, "Betting on Success," Sunday Business Post, January 25, 2004.
  3. ^ Daniel Gross, "Polls say Kerry. Futures say Bush," New York Times, August 8, 2004.
  4. ^ "Expiry of North Korea Missile Test Contract" http://www.tradesports.com/aav2/news/news_58.html.
  5. ^ "Storm of Protest Forces Pentagon to Pull Plug on 'Terror Futures'," Evening Standard, July 30, 2003.
  6. ^ U.S. Demand Spurs Dublin Firm's Exchange Bid," Irish Independent, May 9, 2005.

References

  • 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, 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.

See also

External links