Influencing a prediction market

Skewing a prediction market: somebody plunged a lot of money into Intrade’s US presidential election market right before voting day.

At around 3:30 pm, I noticed that the order book for both Obama and Romney contracts on Intrade had become unusually asymmetric, with a large block of buy orders for Romney in the 28-30 range, and a corresponding block of sell orders for Obama in the 70-72 range.

Why that combination?

If one really wants to manipulate a market, it has to be done by placing large orders that serve as price ceilings and floors, and to do this across complementary contracts in a consistent way.

The hundreds of thousands of dollars spent (!) didn’t seem to have an effect.  But they could have.

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