Swine Flu Legalism

Off topic:
What do you think should happen with the current swine flu contracts? CDC stated today that they will no longer update their numbers. Currently all contracts are paused.

"July 24, 2009 is the last day that CDC is providing individual confirmed and probable cases of novel H1N1 influenza."

I traded the June swine flu contracts and followed them quite closely. I haven't traded the July contracts at all, so I feel both knowledgeable and impartial.

If the CDC had continued its Friday update series, there would be one more update before expiry. The current count is 43,771. Based on the previous rate of growth, the final update would almost certainly push the count above 45,000, and possibly above 50,000. Their non-update could change the outcome of 300+ contracts.

Keep in mind that these contracts were always more about gaming out what the CDC would post than about the actual spread of swine flu. That's why I stayed out after the June contracts were done -- you had to calculate whether the flu would continue to spread, whether local health departments would continue to test for it, whether state health departments would tally up the numbers, and whether they would communicate those numbers to the CDC in time to be included in the count. It was highly artificial to start with, and anyone trading them intelligently considered all these factors, and also considered the possibility that the CDC would stop updating their count altogether.


I think Intrade should always follow the letter of the contract as closely as possible. Here are the Contract Specific Rules (emphasis mine):

This market is for the number of cases of A/H1N1 Swine Flu reported in the United States before midnight ET on the date specified in the contract.

This contract will settle (expire) at 100 ($10.00) if the number of reported cases is equal to or greater than the number specified in the contract.

The contract will settle (expire) at 0 ($0.00) if the number of reported cases is less than the number specified in the contract.

The Centers for Disease Control and Prevention are reporting the number of "confirmed and probable cases" of H1N1 infection. This figure will be used for expiry purposes. The figures as published at the time of expiry will be used to expire this market. Their figures are detailed HERE.

Due to the nature of this contract please also see Contract Rule 1.7 Unforeseen Circumstances.

This doesn't seem like that hard of a decision to me. It seems pretty clear that the contracts should be expired on July 31st based on whatever the CDC website says on that day.

However, Intrade also includes Rule 1.7, which basically states, "in the case of unforeseen circumstances, we can do whatever we think is fairest."

Consider the alternatives:

-Compile the case numbers from an alternate source. No. You can't really do this because fewer than half the states post their counts publicly. The WHO puts out numbers, but they're just repeating the CDC's numbers.

-Project previous growth forward. No. That would be an unprecedented intervention, and would require Intrade to make potentially incorrect assumptions about the future. The 45,000 point is clear enough, but how would they decide about the 50,000 point?

-Unwind all trades. I suppose this wouldn't be too bad. It would be unfair to anyone who correctly shorted the 55,000+ contracts. I think this would extend a bit too much leniency to anyone who didn't understand how little the CDC cared about the case count. It would also set a precedent that Intrade will tend to intervene in ambiguous circumstances, rather then obey a clear reading of their contract rules.

I like my Intrade like a Republican likes his Supreme Court nominees: an umpire calling balls and strikes, not making up rules as they go along.