Terror Market Back

[inkriminator]

http://money.cnn.com/2003/11/17/news...ex.htm?cnn=yes

Terror futures market back in business

Web site says trading will open in March 2004, free of U.S. government influence.
November 17, 2003: 4:26 PM EST
By Mark Gongloff, CNN/Money Staff Writer



NEW YORK (CNN/Money) - A U.S. government plan to create a market allowing traders to bet on the likelihood of terror attacks and other events in the Middle East has been revived by the private firm that helped develop it.

The market, called the Policy Analysis Market (PAM), will allow traders to buy and sell contracts on political and economic events in the Middle East, including assassinations, the overthrow of regimes and terrorist attacks. The market is scheduled to start trading next spring.

It originally was developed and funded with the assistance of the Defense Department, where officials cited the uncanny ability of other futures markets to predict election results, weather patterns and other complex events.

Heated public criticism forced the Pentagon to end its association with the project, but its Web site, which was idle for several months, now has an announcement saying it will be open for business in March 2004.

The Pentagon's partners in the venture would have been San Diego-based market technology firm Net Exchange and the Economist Intelligence Unit, publisher of the Economist magazine. The Economist is no longer involved, and Net Exchange is pursuing the venture alone, according to its president, Charles Polk.

In response to the highly charged criticisms that ended the Pentagon's association with the project, Polk noted the market is designed mainly as a research tool, not unlike the Iowa Electronics Markets, which have done a pretty good job of predicting the outcomes of presidential elections.

"It is potentially an interesting alternative to Gallup polls or to specialists reporting from the region," Polk said. "It's a way of going directly to individuals in the region or outside who have knowledge or interest in the political and economic events in the area."

Polk said Net Exchange would initially limit the amount of money traders could invest in the market, so that people won't be profiting from violence or upheaval in the region.

What's more, the futures contracts would be based on general questions, such as the likelihood that the King of Jordan will be overthrown at some point during the second quarter of 2004, for example, rather than on specific acts or events, which could lend themselves to manipulation by terrorists.

"There are no financial incentives for nefarious activities," Polk said.

These were the kinds of concerns that drove much of the criticism of the project this summer. Democrats expressed moral outrage at the prospect of a "betting parlor on atrocities and terrorism," in the words of Sen. Ron Wyden, D-Oregon, while Republicans -- including Deputy Defense Secretary Paul Wolfowitz -- acknowledged the project subjected the Bush administration to charges of callousness.

But after the project was shelved, some observers expressed disappointment, saying the market could be useful and citing the accuracy of the Iowa futures markets, TradeSports' Saddam Hussein futures market and others. Net Exchange said "many individuals" encouraged it to start the project up again.

Former Admiral John Poindexter, who was forced to leave the Pentagon in part because of his association with the project, will not be involved in the market, Polk said.

More information about the specific workings of the market will be available in December.

I'm not surprised that this idea has come back in a form devoid of government backing. It appears to be a good experiment at the least if instituted with proper security measures.

[Conclamo Ludus]

Its interesting to say the least. I don't know how comfortable I would feel about benefiting from the next terror act though. I like to gamble now and then, but when I pick my winning teams in the NCAA Final Four, nobody gets killed. Maybe I don't entirely understand the reasons behind it, but it doesn't surprise me, nor do I think it should be shut down or anything. Its not government funded, if it was, I might be a lot more disgusted.

[auswegian]

W....T....F?

Only in America. And thank Christ for that.

[dy156]

It's actually a good idea. I wrote about it on the thread about terrorist futures markets when the story first came out. Studies have shown that markets are more accurate than weather forecasters in predicting Florida citrus production, someone or several someones profitted from 9/11, when American and United stocks were sold short just prior to the attacks at a far greater rate than should be expected, and following the explosion of the space shuttle in 1985, the stock of the company that made the booster rocket rings took a huge hit compared to the stocks of other shuttle component manufacturers, and the markets reflected this years before the investigation was complete that showed the booster rocket rings were at fault. I know it's distasteful, but it's a tool to gather intelligence about terror attacks, which is something our government needs help with, and I wish the Feds were still in charge of the program.