Trading on Whanganui contracts to be suspended at 1:45pm

We will suspend trading on these contracts at 1:45pm before we make some calls to officials. Expect a decision later today.

Aww, but it was fun trading on the volatility while folks tried to second guess things!

Admin, I'm not sure (1) it is necessary to halt trading while you reach a decision or (2) that 9 minutes' notice is sufficient notice!

I would ideally have liked to close my position on the market, prior to trading being halted.

I feel that way about every stock I've ever purchased. Although I have an added condition that I need to have made a profit also.

I'm happy with however you go on this, Matt. I did love watching folks pick up my bids at 40 and my asks at 85, but it was a picking up nickels ahead of the steamroller kinda game.

I suspect the main reason trading is suspended is so that there is no perception that iPredict employees could be trading while the decision is being made.

And it is really the only option available to iPredict when something like this comes up. It was touted as the best option after the Fiji debate. It shows that there is definately a level of uncertainty and that it is currently being investigated.
If that doesn't make sense imagine that the stocks are now closed... just no one has been paid out... and we don't know the (legal) outcome...

Sorry about the short notice. The reason we halted trading is because we were about to start making calls to outsiders, and we were keen to avoid any risk of them using any information in those calls on the market. People raised concerns about that during the Fiji closing decision when trading was not halted during research. I personally like the idea that trading continues - I tend to think that the ability to close out your position and shift risk onto somebody else more prepared to deal with it has strong efficiency benefits, but then I might think differently as a trader worried about insiders.

Please let us know your thoughts in reply to this.

I'm pretty relaxed either way and don't have an opinion. I don't have any issues with temporary locking a stock.

I do however have an issue with a stock (or bundle) being closed too quickly, as I think was the case with the Wanganui/Whanganui contracts today. I believe the definitions of the stocks were not sufficiently tight - not just the single vs plural per the BOTH contract, but also 'official name' vs 'city name' in the Wanganui stock and the Whanganui stock. Allowing more time to clarify the announcement and intentions may have provided better information as to which contract(s) conditions have been met.

I know what you mean Andrew, but the market didn't seem concerned about the BOTH vs OTHER debate - BOTH went to 98+ cents very very quickly.

The traders seemed very confident that the stock would pay out.

Understood. I posted in the other thread (as did another) that I'm not sure the terms of the contract were actually met for BOTH to pay $1. What concerns me is the decision was possibly the path of least resistance and/or the least worst outcome. Personally I don't really care about the actual contract - I went long for 5 stocks post announcement at a cost of $2 so it's no skin off my nose. I'm just not convinced the argument supporting the reason for the payout was matched by the wording of the contract. Of course I'm happy to be corrected if the official name does include both versions of the spelling.

In future I won't be touching contracts that are open to varying interpretations - I get enough of these sorts of debates in historical wargaming on weekends, that I don't need to get into that sort of stuff here too........I have been accused of being a 'rules lawyer' in wargaming but hey if that's what the wording says......

Cheers and good luck!
Andrew



Edited 3 time(s). Last edit at 12/18/2009 10:24AM by andrew93.

@andrew93

Agreed, the key message from this is get your lobbying efforts in early at decision time! Not to different to what goes on when bondholders are deciding who should take a haircut.

I like the ability to close out a position right up until the contract is judged. I don't really understand the insider information objection, though. If a trader is concerned about trading at a time when others may have much better information (ie the officials who are being called), then that trader can avoid suffering any losses by simply not trading: hold onto your position until the contracts are judged. So, if you are concerned about losing money by trading with an insider, then don't trade. Those of us who are willing to take a risk on the judging decision should be entitled to close out their positions by trading with fellow clueless traders, the market-maker or, dare I say it, an insider who knows what is going to happen!



Edited 1 time(s). Last edit at 12/18/2009 09:27PM by Taurusport.

Yeah, agree with Taurusport on the suspended stocks. No reason why we shouldn't have been able to keep trading them.

Quote
andrew93
I posted in the other thread (as did another) that I'm not sure the terms of the contract were actually met for BOTH to pay $1.

Yeah, I agree with that. But more to the point, would BOTH have been judged at $1 if we had waited to January and the minister had amended the legislation and made both names official, and specified that "either may be used"? I think this is what will happen, and if the contracts had been judged in January I'm even more confidant that OTHER would have paid out, so why not leave the stocks open until January and let the market decide and take that information into account as it becomes available?

Disclosure: took about a $15 hit the day before they closed, and about a $30 hit on judging. Probably about $60 worse off than I would have been if OTHER judged at $1. I understand that this is not a huge amount of money relative to the position held by the person who bid up the BOTH price around 5PM the day before it closed (probably about $1500 long on BOTH??), but am also a little concerned about andrew93's statement that "What concerns me is the decision was possibly the path of least resistance and/or the least worst outcome."

Agree again with 'Taurusport', I thought the entire objective of this trading market was to allow an accurate prediction, including insider trading as that gives a more accurate price.

As quoted from the help blog, "If you have inside information, use it. You are perfectly entitled to do so on iPredict. "

Maybe this should be changed to " we will give you about 5 minutes warning if we want to do research, then we will suspend trading so that if these people knew about this market, they cannot make the prices on the market accurate, i.e. insider traders shouldn't be allowed to trade. "

i think the difference here is this would have been insiders inside ipredict not insiders from external sources

Admin was right to suspend trading at the point when he started contacting arbitrators about which side of the contract ought to pay out. Little chance the arbitrators would then go in to trade based on their proffered advice, but guarding against even the chance of it well worthwhile.

Thanks for the feedback. I prefer it that stocks remain trading - we want people to be able to close out their positions when they become uncomfortable, and on these contracts there was clearly room for discomfort. But I do think that people could rightly complain about unfair advantage when in researching a contract's closing price the people we speak go set up an account and start trading. If it biases the opinion they give us then allowing trading could conceivably produce bad closing decisions.

However, point taken: we will try to give more warning on suspension of trading.

I have to say I don't understand the objection from hidn and one or two others - I'm not sure what we could learn in January that might change the decision. The contract was tied to the official name, not the government's suggestions on which name should be used. That is something we did anticipate would happen when writing the contract, and I think it is pretty clear in the contract's wording - the contracts were tied to the official name, not use.

We knew when we launched these contracts that there would be some grey, and I like to think that everybody trading in the contracts were also aware of the potential for a mismatch between the contract's wording and the outcome. Thankfully these sorts of things only come up infrequently, GM, Fiji and now this, which isn't too often across 500 contracts. There is a skill in writing a prediction market contract that, one hopes, we improve at with practice.

I have to say I'm really pleased with the tone of the comments here. Obviously some people have to miss out whatever decision is made but its great to see some assertive comments being made without any rancour or entrenchment. Great stuff.

Anyway, back to work.

Well, this has turned out to be a fine fiasco.

To make my position clear, I was long 100 CITY.WHANGANUI and correctly, that closed at $0.00. I had been short 125 CITY.OTHER which I covered on 17 December when I was able to cover at less than 1 cent each.

Just how did CITY.BOTH get to close at $1.00 and just how does “For this contract to pay $1, the words Wanganui and Whanganui must appear in the official city name.” translate into “For this contract to pay $1, the words Wanganui or Whanganui must appear in the official city name.”?

The sentence “For this contract to pay $1, the words Wanganui and Whanganui must appear in the official city name.” is clear, concise, unambiguous and, I would have thought, very difficult to interpret any other way than it is written. Yet, in spite of it's clarity, it has somehow been interpreted differently.

As to the Minister's decision and the way the contracts were worded all should have closed at $0.00.This however, created a problem, iPredict, has to, I believe make a pay-out as it can't keep the money. Please correct me if I've got this wrong. To achieve a pay-out, a winning stock had to be chosen, however no matter what the imperative was to find a winning stock, it still doesn't make that decision correct in fact.

You may wonder though, why I call this a fiasco and it's only right that I should back such a claim.

On October 01, 2009 04:05PM, admin opened the “Wanganui or Whanganui? Or both? Or neither.” thread in the Active Stocks forum.

When I had had a look at the available contracts I was very concerned about the fact that there was one stock missing, perhaps something like CITY.BOTH.INDIVIDUALLY.

The depth of my concern was such that I posted this comment in the“Wanganui name contracts.” thread in the Ask a Question forum on October 02, 2009 05:30PM and in the “Wanganui or Whanganui? Or both? Or neither.” thread in Active Stocks on October 02, 2009 10:09PM.

“With the new contracts for the official name of Wanganui there does not appear to be a contract for Wanganui and Whanganui both being official but not together. In other words that either may be used and be officially recognized.

As I feel this has a reasonable degree of possibility I believe such a contract should be available.”

I would strongly urge members to have a look at the whole of the “Wanganui name contracts.” thread and in particular to this comment by admin on October 07, 2009 06:37AM

“The answer is in the contract definitions. The contract depend on what Wanganui's official name will be after one or more transition periods. If the official recognition is by Wanganui's official name being "Wanganui or Whanganui" or "Wanganui/Whanganui" then the Wanganui/Whanganui contract will pay $1. If the official recognition is by setting Wanganui's official name to "Whanganui" but leaving, say, half of all signs as Wanganui then the CITY.WHANGANUI contract will pay $1, because it is the city's official name that matters. If the official name of Wanganui is changed to, literally, "Either" or WhanganuiWanganui or some other new word, then the CITY.OTHER contract will pay $1.”.

I could accept that even with my drawing attention to this problem, of what in fact, turned out to be the final decision, as early as I did and that it was not being covered by any existing contract, I cannot accept that the situation could not have been remedied.

The remedy, I believe, is available by altering the critical sentence in CITY.BOTH, “For this contract to pay $1, the words Wanganui and Whanganui must appear in the official city name.” to read, “For this contract to pay $1, the words Wanganui and/or Whanganui must appear in the official city name.”, this would have allowed CITY.BOTH to have, correctly, closed at $1.00.

Obviously, some contracts will be difficult to word and equally obviously, a lot of members do not like trading being suspended. So what to do?

My suggestion where contracts are presenting some difficulty in writing or may be likely to be controversial, is to launch under suspension perhaps for a period of five days and this will provide time for members to also be able to go over the criteria and if problems show up there will be time to fix before trading begins.

Please note! I am not suggesting this for all, or even many contracts. There are only a very few that end up in controversy so this would be an infrequent event. There is a need however, to be able to take contracts as they are read and not as they may possibly be interpreted after the event.

To quote mrh -
“and we're now betting on the interpretation of iPredict's lawyers. Which makes the whole prediction exercise a bit of a joke when what we're predicting isn't what we think we're predicting, and when the names of the stocks mislead the predictors.”