Tradesports announces new fee structure

I don't like it that much:

Thursday, Jun 21, 2007

TradeSports has announced that it will introduce an entirely new fee structure for its members. This will go live on 27^th June 2007*.

The new fee structure will mean:

• Trading Fees of 5c per lot and Expiry Fees of 10c per lot will be withdrawn.
• Members will pay a simple commission of 4% of the profits they make from trading on a TradeSports market (a market is an individual contract or a group of linked contracts).
• Trading profits before the expiry of an event may generate a commission, but it will be your overall net profit on settlement of the event that will dictate your net commission payable.

More detailed information will be made available on the site closer to the go-live date.

*Unless we advise an updated go-live date.

It works out to 20 cents for each $0-10 contract on average. That's in addition to the float of 2 bips per day for account funds on deposit. But due to the first mover advantage which results in a liquidity edge plus the current legislation, competing for market share is hard for a new entrant, so TS has pricing power for now.

I'm still going to trade. But I trade small. I wonder about some of the bigger fish that swim here, if they will be disincented by the new fees.

I'd rather see:
1) double the liquidity and half the proposed fee rate
2) 50% of the fees to be assessed on expiry
3) 75% of the fees to be assessed to the liquidity taker
4) -25% of the fees to be assessed (i.e. a rebate) to the liquidity provider

This works for exchanges like Island. I always try to route my trades there, because they pay me to add liquidity. While the liquidity taker pays more, the spreads on contracts should tighten up, there by offsetting some of the cost under the old fee schedule.

UPDATE: More on this at Midas Oracle (scroll down, the first 2 comments are mine, including a conversation in the Pit with Todd).

Alex Forshaw on Bloomberg for POTUS

I think Alex is astute here:

All Bloomberg brings to the table is money. In terms of positions, he is well to the left of the Democratic Party: totally pro-choice, a regulatory and environmental fascist (smoking and trans fats come to mind), a massive tax hiker in the name of education, and so on and so forth. (Yes, NYC is doing well. Does Bloomberg deserve credit for that? In my opinion, no -- huge growth in the finance industry delivered a tax windfall into Bloomberg's lap.) Not to mention Bloomberg's severe elitist streak.

In fairness to Bloomberg, if anybody deserves to be an elitist, he does. After all, he is a hell of a lot smarter than most of us. His "Bloomberg machines" are ubiquitous up here -- for $2000 a month, the user gets access to mind-boggling amounts of financial data, delivered in a pretty usable package. Bloomberg makes $1 billion a year after taxes on these things, on top of a net worth of $20 billion.

I think a Bloomberg run is the best thing that could possibly happen for the GOP. The GOP could keep 42-46% of the popular vote with Fred Thompson and keep their base intact, instead of having Rudy win a Pyrrhic intraparty civil war over social issues to give the GOP a one-in-ten shot at a 50.1% victory in the popular vote.

Sopranos imitates Clinton campaign

Hilarious, that Gawker:
... the most plausible solution to what happens after the show goes dark: Tony is term-limited out of his job as head of the north Jersey mob. After his chosen successor is rejected by a crooked Mafia Supreme Court despite being elected fair and square, he and Carmela plot a return to the top through a Machiavellian scheme where Carmela shows the mob that she's as tough as any other candidate. Then some black guy comes in and screws it all up.

Uh oh, is this the top?

From WSJ:
CNBC commentator and investment manager Ron Insana has lined up a list of at least 13 top managers who will be part of his new hedge-fund offering, according to fund documents reviewed by The Wall Street Journal.

Insana Capital Partners Legends Fund is structured as a fund of funds, meaning that Insana’s job is to collect investors’ money and then seed that money into still other funds, extracting a fee along the way. It is unclear just how large the fund will be. Insana and fellow executive John S. Roglierli are soliciting initial investments of at least $500,000 each.

The 16-year CNBC veteran raised some media eyebrows when it was revealed last fall that he was launching the fund. One Dow Jones columnist said the move signaled that “it’s probably time for everyone else to get out” of the hedge-fund business.

World context for US publicly held debt

From the indefatigable Steve Conover:

Chances of Fed Funds Rate at or above 5.25%:

Charts of home sales, gas prices, the Dow, and recession odds

From Swivel

From Intrade

The attribute of successful traders

By Felix Salmon. If I could attempt a paraphrase,

A successful trader needs to be so arrogant that he can effectively convince himself that he is wrong.

There is a link to John Kay on Richard Rorty. He seemed to channel the ghost of Karl Popper, from my quick reading.

I think that my aspirations for humility are career limiting. It is actually amazing that I have the risk limits I do. But then again, I've never come close to blowing up. Aim small, miss small.

Is the IPO market a distorted market?

Yes (WSJ subscription required). But is that a bad thing? Not according to the Supreme Court:

In a 7-1 decision yesterday, the court said the securities markets were a different animal than ordinary commerce and that practices that might seem to violate antitrust laws in other sectors were essential to Wall Street.

The court said the job of policing combinations among brokers rests with the Securities and Exchange Commission, whose regulators possess the expertise to distinguish permissible arrangements from illegal conspiracies.

The Supreme Court, in an opinion by Justice Stephen Breyer, preferred to draw the bright line favored by the banks and the SEC. "Financial experts, including the securities regulators, consider the general kind of joint underwriting activity at issue in this case, including road shows and book-building efforts essential to the successful marking of an IPO," Justice Breyer wrote.

Justice Clarence Thomas dissented, arguing that the securities laws were intended to supplement, rather than replace, other remedies such as antitrust laws. Justice Anthony Kennedy didn't participate in the case and, as typical when justices disqualify themselves, offered no explanation why.

(Note: I think Kennedy has a relative in the investment banking business).

I would sum it up this way--it is hard to find an price for something that is not available to the market. For example, shares that have not yet been offered. Issuers, distributors, and investors work together to converge on a price, given multi-party valuation analyses and demand forecasting. It's not as good as a free market for pricing, but there is no market yet.

I've worked for banks since graduating from college (not in investment banking), so since this indirectly affects my job prospects and also my Manhattan home value, I am disclosing it.

UPDATE: Justice Stevens wrote this:

After the initial purchase, the prices of newly issued stocks or bonds are determined by competition among the vast multitude of other securities traded in a free market. To suggest that an underwriting syndicate can restrain trade in that market by manipulating the terms of IPOs is frivolous.

UPDATE: Also from the WSJ, while the Supreme Court "gets it", the Federal Trade Commission doesn't:

But this is where the FTC's story gets weird. It wants to argue both that the quality, selection and "experience" make Whole Foods unique among supermarkets and that without competition from Wild Oats (in the few markets in which they overlap), Whole Foods' quality, selection and experience will worsen. Which means, we guess, that Whole Foods would look more like an "ordinary" supermarket. Which would mean, more competition for Whole Foods. Or something. We admit the FTC lost us when it started arguing that Whole Foods' evil plan is to undermine the very uniqueness on which the FTC is basing its antitrust case.

Maybe the FTC is responding to heat from Capitol Hill to show it's on the job, but pandering to Congress has never made for good antitrust policy. Whole Foods says it will battle the FTC in court, and the case will make for some entertaining jujitsu as Mr. Mackey argues that his stores aren't as unique as his marketing materials suggest, while the FTC pleads that the merger will make Whole Foods less unique and more expensive at the same time. Such are the absurdities of modern antitrust policy.

Chris Masse updates us on Blu-ray vs. HD DVD

He continues to serve the possibilities, no, realities of prediction markets well.

One reason why Intrade/Tradesports is way ahead of the SEC

Their respective views on the tick test.

World's largest lake disappearing ... because of global warming?

I thought land would disappear, not water. Shows how much I know (via Instapundit).

Still no global warming contracts to trade.

UPDATE: Steve Levitt joins Greg Mankiw in advocating energy taxes. I actually am in favor of such a tax, but only if it comes with offsetting income tax reductions. Otherwise, economic growth momentum will turn and regress, increasing poverty and creating more "have not" households. Not holding my breath on that one, so I usually keep pretty quiet on being pro-energy tax.

Birdflu update

From Swivel

From Intrade

The best sports rivalry

I'm long the Red Sox at 8.8 and short the Yankees from 15.5. We're almost at the all star break. Historically, the Sox tend to fade and the Yankees tend to power up after the break. We'll see what happens this season.

Obama understates his dirty money

Rezko cash triple what Obama says (via Instapundit).

US Open: Cabrera wins, but Furyk pays me in size

I usually leave trading contracts as an individual exercise to my knowledgable readers (especially because we have such differing styles of trading and preferences for risk), but want to talk a little about the US.OPEN contracts to boost potential interest. Before tournament started, I got long WOODS, MICKELSON, ELS, FURYK, SCOTT, and FIELD.

On Thursday, I was able to take a little profit on Woods, Furyk, and FIELD.

On Friday, Mickelson & Scott missed the cut, so I ended up down.

On Sunday, though, I was able to sell my Furyk all the way up to 34, ending up with just 1 FURYK and 1 ELS which each expired at zero.

I am usually able to make a little profit on each of the majors with a similar approach, i.e. buying several of the favorites plus FIELD, and taking profits when possible. The British Open is coming up in 4 weeks. Come and join in the fun if you know a bit about the players and a bit about managing risk!

Q&A with Steven Landsburg, on "More Sex"

Courtesy of Steve Dubner. Some of my favorites snippets:

Our personal welfare is almost always in conflict with the greater good. When something exciting happens at the ballpark, everyone stands up to see better, and therefore nobody succeeds. At parties, everyone speaks loudly to be heard over everyone else, and therefore everyone goes home with a sore throat. The one great exception is the interaction among buyers and sellers in a competitive marketplace, where — for fairly subtle reasons — the price system aligns private and public interests perfectly. That’s a miraculous exception, but it is an exception. In most other areas, there’s room to improve people’s incentives.

and

Thousands of people die each year for lack of a healthy kidney, while hundreds of millions walk around with spare kidneys they’re unlikely to need. That’s nuts. I agree with you guys that most people can probably see that it’s nuts. For some reason, most of those people seem reluctant to embrace the one mechanism — the market — that can actually solve this kind of problem.

and

So if you want to be charitable, all you have to do is hoard your money, or for that matter burn it. But that’s not the best way to be charitable, because you can’t control who gets the benefits. Miserliness is like a random act of kindness; effective philanthropy is about directed acts of kindness. And I argue in the book that a philanthropist who really cares about helping others will usually pick a single charity and target his giving to that one charity. If 100 children are dying of rickets and another 100 are dying of scurvy and you have enough funds to save two children, there’s no particular reason to save one of each; you might as well give your entire contribution to either the Rickets Foundation or the Scurvy Foundation. Either way, you’ve saved two children. And if you have even the slightest inkling that one of those charities might be more effective than the other, then that’s where both your dollars should go.

I do disagree that an STD-free person helps the casual sex pool by jumping into it. An abstainer's risk has a higher opportunity cost, i.e. by copulating with some who is already engaged, the abstainer may contract an STD, even as the abstainer lowers the pool's overall STD probability. The cost outweights the benefit, assuming equal preferences.

I also disagree that denying or suppressing personal demand lowers the prices for everyone else--this assumes everything is zero-sum (a very bad assumption that market bears make all the time and a lot of bears get killed by a stampeding bull market that is not zero-sum, especially over the last few centuries).

You've made me very angry, indeed!

WSJ op-ed:

So Democrats are proposing to raise taxes on three million Americans in order to exempt 20 million from the AMT. The wealthiest 1% of Americans already pay more than one of every three income tax dollars into the Treasury. Under the Ways and Means proposal, the share of all income taxes paid by the top 1% would rise to nearly 40%. The top 2% would pay roughly as much as the bottom 98% of all taxpayers. Ways and Means Chairman Charlie Rangel of New York seems to think this qualifies as tax fairness.

There is rough justice in watching Democrats squirm to fix the AMT monster they created in 1969 to punish 21 millionaires who legally escaped taxes at the time. And if Democrats want to do away with the AMT, we're all for it. One sensible idea from Senator Arlen Specter of Pennsylvania would repeal the 1993 Clinton AMT tax hike, which raised the rates to 26% and 28% from the single rate of 24%. Mr. Specter's bill would relieve 10 million middle class tax filers from AMT tyranny.

But Democrats don't want to cut taxes; they want all of that extra revenue to spend. So instead they'd raise the top federal tax rate to its highest level in a quarter-century. A 44% top marginal rate would reduce U.S. competitiveness by reducing the after-tax return on investment. Less investment means fewer jobs and lower wages. A Tax Foundation analysis of tax returns finds that roughly three in every five Americans in the highest income tax bracket are small business owners, who create most new jobs.

Like Shaw said: A government that robs Peter to pay Paul can always count on the support of Paul.

The tyranny of a government sponsored majority undermines democracy.

GOP presidential probabilities fading

From today's WSJ:

The survey shows that without formally entering the race, former Tennessee Sen. Fred Thompson has risen to second place in the Republican field. Former New York City Mayor Rudy Giuliani continues to leak support, but leads the pack with 29% to Mr. Thompson's 20%, while former Massachusetts Gov. Mitt Romney has pulled even with Sen. John McCain at 14%.

Of greater concern for Republicans generally, however, is the party's weak state heading into the 2008 election. By 52% to 31%, Americans say they want Democrats to win the presidency next year.

Americans give the Republican Party their most negative assessment in the two-decade history of the Journal/NBC survey, and by 49% to 36% they say the Democratic Party more closely shares their values and positions on the issues.

"Fair Value" will be market making the US.OPEN today through Sunday

Spreads are a little wide, but I've already taken a little profit (mostly from US.OPEN.FURYK).

Fair Value: Good morning Golf Fans

Fair Value: I will be MMIng the event throughout the 4 days

caveatBettor: hi FV

caveatBettor: i've picked up a couple contracts, furyk trading nicely

caveatBettor: i wish you fair trade winds

Fair Value: ta

Fair Value: they say this course will be brutal

caveatBettor: right, tiger talking down birdies

Fair Value: Monty in the lead at -1 ... lol

Steve Conover has found where the middle class disappeared to

Many of them became too wealthy to stay middle class. Brilliant,
as usual.

UPDATE: Conover prints a correction. I guess I've got some confirmation bias, because when I read it, I started thinking about the internet bubble and record low unemployment in 2000, and also thought about baby boomer retirement impact on his data.