Idea Futures - current application

[E. ALLEN SMITH]

	Of course, a form using anonymnity would be preferable. I find it
very interesting that the Commodity Futures Trading Comission is allowing
this; it increases my opinion of them. If someone would forward this to the
extropy list, the idea futures folks on there would find it interesting.
	-Allen


   Reuters New Media

   _ Monday April 1 2:32 PM EST _
   
U.S. Traders Play Political Futures In Cyberspace

   
   
   CHICAGO - As primaries in the American Midwest confirmed Senate
   Majority Leader Bob Dole's clean sweep, a Wall Street trader logged
   into the Internet on his home computer and made one last trade before
   going to bed.
   
[....]
   
   These political futures contracts are not available at the huge,
   traditional exchanges that trade billions of dollars per day. Instead,
   the contracts are on the 24-hour Iowa Electronic Markets (IEM), which
   trades several thousand dollars per day.
   
   The IEM, setup in 1988 by the University of Iowa, is a not-for-profit
   political futures market open to traders globally via the Internet,
   under the regulatory scope of the Commodity Futures Trading
   Commission.
   
   An estimated 5,800 people have registered as IEM members by sending
   checks or money orders to open trading accounts of $5 up to $500 to
   trade various world political markets that also include Austria's
   Vienna City Parliament Election and Canada's British Columbia
   Provincial Elections.
   
   Collectively, accounts total about $150,000, said Joyce Berg, a
   professor of accounting and director of markets at the University of
   Iowa.

[...]

   In that race, IEM payoffs are determined by the candidate who wins the
   majority of popular votes. Contracts in the candidate receiving the
   largest number of popular votes will pay $1 each while all other
   contracts will expire worthless.
   
   "For those of you with Web access, let me point you to an
   astounding place for us market geeks -- the Iowa Electronic
   Market," one trader wrote in the Option Fool newsletter, written
   and distributed via the Internet.
   
   "It's a fun market," said Gary Sparks a stock options trader
   at Group One Trading who participated in the market during the last
   presidential election four years ago.
   
   But some take the IEM seriously because each candidate's contract
   price in cents can be translated into his percentage chance of
   winning.
   
   And in the past two U.S. presidential races, the IEM has predicted the
   winner with an average 0.2-percent absolute margin for error. That
   compares to the next most accurate Harris poll with a 1.2 percent
   margin of error, according to the Iowa Political Market's data.
   
   That type of accuracy has caught the eyes of at least a few U.S. stock
   options traders and has earned a weekly spot in a New York Post
   newspaper roundup of presidential polls.
   
   Jeff Yass of Susquehanna Investment Group said he considers what IEM
   markets are showing when making trading decisions in stocks and
   options. "Clinton and Dole have been in a tighter race (on the
   IEM) than any of the Wall Street analysts have predicted," he
   noted.

[...]

Copyright 1996 Reuters Ltd.