Monday, Jan 22, 2007
Approximate transcript of John Delaney's presentation to the AEI-Brookings Joint Center Prediction Markets Conference in Washington DC on January 18th 2006
After being introduced by Robert (Bob) Hahn, John Delaney presented for approximately 35 minutes and answered questions from the floor for approximately 15 minutes.
The following is an approximate draft of John?s notes and transcript of his talk.
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SLIDE 1 - CONTENTS
Bob, Thank you for the truly fantastic introduction. We appreciate it and hope we can continue to warrant such kind sentiments.
But before I start I would just like to say thank you to John, Molly and Bob for making my attendance possible today. It is a shame that we had a video glitch and we are unable to see each other.
Let me say that I would really love to be with you in Washington DC today, but it will be great to see some of you in London soon, and also one or two from your assembly there today in Dublin in the coming weeks.
Let me offer a warm and genuine invitation to any and all should you ever be in Dublin to visit with us or in London. Let us know and we will endeavour to meet with you.
So we are all coming to the end of a relatively long day ~ you will all be happy to hear I have a relatively short presentation today, leaving plenty of time you're your questions, and I hope some good answers.
Today I do want to update you all on just some of important things that are happening for us at Intrade.
Namely, I would like to discuss our reorganisation;
I would like to add transparency by talking about selected prediction market
metrics and finally some important business developments.
SLIDE 2 - THE INTRADE BUSINESS & REORGANIZATION
While most of you will be very aware of the service we offer and our recently announced re-organisation, there may be some who are not so familiar with Intrade and I would like to spend a minute on this topic.
We have operated an on trading platform from Ireland for approximately 5 years now. We have become regarded by many as the pre-eminent real money prediction market in the world.
This pre-eminent position has been facilitated by the very hard work of a small team of dedicated individuals but realised as a direct result of the loyal support and trading of our members. It is our members who make the predictions that generate the information that has driven our success to-date.
As an aside it is worth saying that we are not bookmakers, nor are we involved in the business of bookmaking, betting or wagering. While we often get questions like who sets the prices we typically reply by saying we are just like eBay who provide a platform for people to trade all manner of things. We similarly provide a platform for people to trade on.
Since launch we have offered markets in sports, politics, current events, financials, weather etc. As Bob mentioned over 70,000 people have registered as members but tens of millions of people have been exposed to the predictive information from our market.
Now...
Due to the success of political, current events, financial and non-sports markets and also in no small part due to a clarification of US attitudes towards anything even vaguely connected to sports betting we decided to divest and disassociate from sports.
This decision made late last year expedited our long standing intention, an intention that we have discussed with some of the assembled previously, to exit sports and to focus our business on non-sports prediction markets.
To that end Intrade will soon operate as a stand alone business and platform. The estimated date for completion of this work is end of February.
So we [Intrade] will only have prediction markets and there will be no prediction markets on TradeSports.
Our reorganization will have many benefits some of which I will talk to later.
SLIDE 3 - SOME INTRADE METRICS
Prediction markets and transparency go hand in hand!
So consistent with that principal I would like to offer you some additional transparency on just some of our prediction market key performance indicators or metrics
But before I do, let me mention an observation and an idea.
I have observed numerous requests to our help team from external parties interested in our space for information relating to the depth and breadth of interest and trading in prediction markets. I am sure the good folks at the Iowa exchange get similar requests. This type of information transparently provided will validate further our industry and educate more to the good we serve.
My idea is that it would serve our industry very well if there was a co-ordinated effort to provide additional transparency. Simple information like the activity levels on all platforms, be they play money, real money, public, and private where possible. I would like the prediction market community to deliver on this in 2007. Perhaps John M will co-ordinate and we will help in any way we can.
But let's get back to some of the non-sports or prediction market statistics...
12,000 active prediction market traders in 2006. We define and active trader as one who traded exclusively or almost exclusively on prediction markets. Please note that many more people register and become inactive or just use the data.
Over 30 million prediction market orders were entered, with the majority on financial and political markets.
Over 3,000 market suggestions were received by email from all over the world.
Over 58,000 individual prediction markets were opened and closed in 2006 and we have prediction market traders in over 100 countries.
As of yesterday there were over 5,500 unmatched PM orders and open interest exceeded 1 million contracts.
On average we get 5 requests for market data every day from academia, the media, traders, investment businesses, government organisations and occasionally supranational organisations. And we are thrilled to get these requests. They validate what we all do.
The key observables from the data mentioned include:
1. There is significant, broad and growing global interest in PM's - I am sure HS, HSX and NF and others experience the same.
2. There has been an acceleration in the number of suggestions that we get - we view this as a leading indicator of future interest and growth.
3. The markets are already quite sophisticated with automated and API trading now accounting for a major part of all trading.
To conclude then before I cause analysis-paralysis let me say the following?
If one of our fears as commented on by Robin
and Justin previously is that people may become jaded with PM's and interest
would fade, then I would like to let you all know that from the evidence we see
there is little fatigue relating to prediction markets.
SLIDE 4 - "SUCCESSES" & "FAILURES"
I would like to make a very quick point about the expectation that some have for prediction markets, particularly some of our media colleagues.
Prediction markets are not infallible. They are prediction markets, not guaranteeing markets.
A market trading at a 90% probability does not mean something is certain to happen. 90% is 90%. So when it is reported that the markets were wrong, these types of assertions are overly simplistic and unhelpful.
In 2006 our markets, like some others, did very well.
We saw a fantastic example with the Rumsfeld resignation market that moved from 20% to 41% almost 7 hours before we are aware of any public information being available.
There are many other such examples, but for balance let me also say that some of our markets did not do so well. We had a number of markets that settle at 0 having traded for a long time in the 70's and 80's, e.g. the Republicans and the Senate.
One other point.
Where new markets are concerned, there may often be issues related to market definition, interpretation, and understanding. We experienced an issue with our North Korean market definition. We have learned from this as have our community and I expect the broader industry instead of implying infallibility of PM's, or arguing the superiority of play over real money, our call to action should be along the lines that...
Prediction Markets are fantastic aggregators of
data that provide hugely valuable albeit fallible predictive information. We should all EMBRACE THEM.
SLIDE 5 - DEVELOPMENTS 2007
Let me now update you briefly on just some of the important developments we have in progress or planned for 2007:
Alas I can't divulge a lot of details, although I would love to, but we are very very excited to partner with and learn from a world leader in news generation and distribution.
This PM to be launched later this year. It will extend the reach of PM's, and extend the participation generally. This is good for us all.
One obstacle often identified to the success of PM's is getting traders, and that inducements are very important. Well let me just say that the inducements to get people to play on this new PM will be like nothing we have seen before. They are fantastic and our own team are devastated that they are rightly prohibited from joining.
While there are many really good public play money sites up and running, some with features that we can learn a lot from, I believe we can add to the currently available product offering and will soon. For example we will facilitate members to:
In 2007 we are determined and now have the bandwidth to press ahead with this with our normal level of enthusiasm. We are looking at regulation in various jurisdictions.
SLIDE 6 - SUMMARY & CONCLUSION
So to summarize very briefly I would like to say...
Finally, to any of you thinking of getting involved in or supporting prediction markets, or considering their use or validity, whether they use play or real money, be they public or private, then I urge you to grab hold of a fantastic opportunity.
Entirely new industries don't normally establish quickly or easily, there will be naysayer and worse which we accept as normal. But we remained convinced irrespective of setbacks that something amazing is happening for us all in this industry. We may not know how it will all unfold yet, but I for one am thrilled to be part of it.
I thank you for your attention.