How can we deal with the market definition issues?

Yesterday I visited the Thames-side headquarters of Betfair to discuss with the managing director, Mark Davis, and senior members of his time a range of issues relating to political markets – a meeting that had been set up as a result of an earlier session with Nick Palmer MP.

Although in terms of its overall business the amount traded on political markets is small the firm is keen to operate in this area – not least because of the profile it gives them. They recognise that, unlike a premiership football match, working out rules that can deal with settlement issues, as we have seen with the Blair exit date market, are critical and plan, in future, to run things past me before something is launched.

The firm, which is by far the world’s leading betting exchange, is keen to develop more markets provided there are ways of defining them that do not land them in trouble. The challenge is that if there is an argument over the terms the firms stands between two sets of punters – those who’ve bet for something and those who have bet against – and only one side will be satisfied.

Several ideas that we talked about look promising. These include:-

Who will be in Brown’s cabinet? A date, say, July 7th could be set, and punters would be asked to bet on whether a range of different individuals would be part of the top team. Would, for instance, Patricia Hewitt be in or out? The official list as published by Number 10 on the due date could be a fail-safe way of dealing with arguments. This would not be on which positions they held but simply whether or not they would be in the cabinet. This has lots of potential – who will hold onto cabinet positions under the new regime and which new-comers will be there?

The size of the Brown bounce. We looked at developing a sure way of defining a market for punters to assess the impact on Labour’s fortunes with Gordon at the helm. An idea I suggested that could be explored is to take the average Tory lead/deficit from the three major polls that will be published in September 2007. These would be the first surveys in the month by Populus in the Times, ICM in the Guardian, and YouGov in the Daily Telegraph. There would be options like – CON 3%-5.99%: CON 6% or more etc. We would be dealing with published data so the definitions would be clear.

The first leader to go. Simply which of Ming Campbell, Gordon Brown and David Cameron will be the first to stand down as party leader. Bearing in mind what has happened in the Blair exit market the wording of what “stand down” means would have to be watertight.

The New Hampshire primary and the Iowa Caucuses. there’s already a mass of polling and build up of interest on which candidates for the Democratic and Republican nomination will top the polls in the first two tests of US opinion on Iowa and New Hampshire in January 2007.

The great thing from what was a highly constructive meeting is that we now have a line right into the company. Hopefully issues like the US mid-terms Senate market or the Blair exit date will not happen again.

If anybody has other ideas then please leave a comment below or email me.

Mike Smithson