Terrorism Futures To Start Trading

Discussion in 'Financial Futures' started by canadian_dude, Jul 28, 2003.

  1. Unbelievable as it sounds, apparently they are going to start trading futures based on possible future events like terror attacks, assassinations, government overthrows, missile attacks, etc. Full story follows:

    Pentagon's Futures Market Plan Condemned
    AP to My Yahoo!

    By KEN GUGGENHEIM, Associated Press Writer

    WASHINGTON - The Pentagon (news - web sites) is setting up a stock-market style system in which investors would bet on terror attacks, assassinations and other events in the Middle East. Defense officials hope to gain intelligence and useful predictions while investors who guessed right would win profits.

    Two Democratic senators demanded Monday the project be stopped before investors begin registering this week. "The idea of a federal betting parlor on atrocities and terrorism is ridiculous and it's grotesque," Sen. Ron Wyden (news, bio, voting record), D-Ore., said.

    The Pentagon office overseeing the program, called the Policy Analysis Market, said it was part of a research effort "to investigate the broadest possible set of new ways to prevent terrorist attacks." It said there would be a re-evaluation before more money was committed.

    The market would work this way. Investors would buy and sell futures contracts — essentially a series of predictions about what they believe might happen in the Mideast. Holder of a futures contract that came true would collect the proceeds of investors who put money into the market but predicted wrong.

    A graphic on the market's Web page showed hypothetical futures contracts in which investors could trade on the likelihood that Palestinian leader Yasser Arafat (news - web sites) would be assassinated or Jordanian King Abdullah II would be overthrown.

    Although the Web site described the Policy Analysis Market as "a market in the future of the Middle East," the graphic also included the possibility of a North Korea (news - web sites) missile attack.

    That graphic was apparently removed from the Web site hours after the news conference in which Wyden and fellow Democratic Sen. Byron Dorgan (news, bio, voting record) of North Dakota criticizing the market.

    Dorgan described it as useless, offensive and "unbelievably stupid."

    "Can you imagine if another country set up a betting parlor so that people could go in ... and bet on the assassination of an American political figure, or the overthrow of this institution or that institution?" he said.

    According to its Web site, the Policy Analysis Market would be a joint program of the Pentagon's Defense Advanced Research Projects Agency, known as DARPA, and two private companies: Net Exchange, a market technologies company, and the Economist Intelligence Unit, the business information arm of the publisher of The Economist magazine.

    DARPA has received strong criticism from Congress for its Terrorism Information Awareness program, a computerized surveillance program that has raised privacy concerns. Wyden said the Policy Analysis Market is under retired Adm. John Poindexter, the head of the Terrorism Information Awareness program and, in the 1980s, a key figure in the Iran-Contra scandal.

    In its statement Monday, DARPA said that markets offer efficient, effective and timely methods for collecting "dispersed and even hidden information. Futures markets have proven themselves to be good at predicting such things as elections results; they are often better than expert opinions."

    The description of the market on its Web site makes it appear similar to a computer-based commodities market. Contracts would be available based on economic health, civil stability, military disposition and U.S. economic and military involvement in Egypt, Iran, Iraq (news - web sites), Israel, Jordan, Saudi Arabia, Syria and Turkey.

    Contracts would also be available on "global economic and conflict indicators" and specific events, for example U.S. recognition of a Palestinian state.

    Traders who believe an event will occur can buy a futures contract. Those who believe the event is unlikely can try to sell a contract. The Web site does not address how much money investors would be likely to put into the market but says analysts would be motivated by the "prospect of profit and at pain of loss" to make accurate predictions.

    Registration would begin Friday with trading beginning Oct. 1. The market would initially be limited to 1,000 traders, increasing to at least 10,000 by Jan. 1.

    The Web site says government agencies will not be allowed to participate and will not have access to the identities or funds of traders.

    The market is a project of a DARPA division called FutureMAP, or "Futures Markets Applied to Prediction." FutureMAP is trying to develop programs that would allow the Defense Department to use market forces to predict future events, according to its Web site.

    "The rapid reaction of markets to knowledge held by only a few participants may provide an early warning system to avoid surprise," it said.

    It said the markets must offer "compensation that is ethically and legally satisfactory to all sectors involved, while remaining attractive enough to ensure full and continuous participation of individual parties."

    Dorgan and Wyden released a letter to Poindexter calling for an immediate end to the program. They noted a May 20 report to lawmakers that cited the possibility of using market forces to predict whether terrorists would attack Israel with biological weapons.

    "Surely such a threat should be met with intelligence gathering of the highest quality — not by putting the question to individuals betting on an Internet Web site," they said.

    Wyden said $600,000 has been spent on the program so far and the Pentagon plans to spend an additional $149,000 this year. The Pentagon has requested $3 million for the program for next year and $5 million for the following year.

    Wyden said the Senate version of next year's defense spending bill would cut off money for the program, but the House version would fund it. The two versions will have to be reconciled.
  2. Sounds pretty f*cked up :confused:

    -FastTrader :eek:
  3. What kind of effect this would have on security for all of us, is easily imaginable for anybody with a functioning brain. And I'm not just speaking of locals. Anybody anywhere in the world can open an online brokerage account these days and then make false threats to get up their accounts, not to even mention plan actual attacks.

    This is the most fundamentally atrocious pile of rubbish I've heard of since the "war on terrorism".

    Only Americans could come up with an idea as morally injustifyable as to link financial rewards to the event of mischief and cruelty. I think in consideration of things like these and the distribution / flow of money in America ofter the past few years, the yanks should really remove "In God we trust" from their money. No other country in the world writes the word "god" on its money. And in no other country in the world could it be such an irony.

    Oh say can you see?

    ~Scientist :eek:

    P.S: Please check out the link below in my signature, to find out what I mean!
  4. sad & stupid
  5. This would be a great way for the terrorists to raise some more capital. Not only do they get to blow shit up, but they actually get paid for it! Only in America :eek:

    -FastTrader :(
  6. I'm not looking for a flaming debate... but, I would guess that the ultimate purpose of such a system would be to identify and circumvent specific potential attacks. I also find it hard to believe they would respect anonymity. Sounds like the carrot in Elmer Fud's rabbit trap to me.

    I think I remember reading after 911 about market analysis systems that were built by the government to identify future signs of unusual activity in key instruments.. this one sounds too science fiction to actually happen though. How far would they go? Options on the lives of US politicians?

    Sounds kind of like the Saddam options that were traded on tradesports.com during the war (a UK site)
  7. for a while, they traded futures and/or options on weather and climate patterns. It was mainly used as a hedge for farmers in agricultural states. The strike price was based on the annual temperture of the area and if it would be above or below that temperture for the growing season. However, the idea never caught on and it was discontinued.

    I'm not sure how this terrorism futures will pan out, but my guess is that it won't catch on either.

  8. funky


    this is sad and disgusting.
  9. msfe


    Pentagon Prepares a Futures Market on Terror Attacks

    By CARL HULSE - NY Times

    WASHINGTON, July 28 — The Pentagon office that proposed spying electronically on Americans to monitor potential terrorists has a new experiment. It is an online futures trading market, disclosed today by critics, in which anonymous speculators would bet on forecasting terrorist attacks, assassinations and coups.

    Traders bullish on a biological attack on Israel or bearish on the chances of a North Korean missile strike would have the opportunity to bet on the likelihood of such events on a new Internet site established by the Defense Advanced Research Projects Agency.

    The Pentagon called its latest idea a new way of predicting events and part of its search for the "broadest possible set of new ways to prevent terrorist attacks." Two Democratic senators who reported the plan called it morally repugnant and grotesque. The senators said the program fell under the control of Adm. John M. Poindexter, President Ronald Reagan's national security adviser.

    One of the two senators, Byron L. Dorgan of North Dakota, said the idea seemed so preposterous that he had trouble persuading people it was not a hoax. "Can you imagine," Mr. Dorgan asked, "if another country set up a betting parlor so that people could go in — and is sponsored by the government itself — people could go in and bet on the assassination of an American political figure?"

    After Mr. Dorgan and his fellow critic, Ron Wyden of Oregon, spoke out, the Pentagon sought to play down the importance of a program for which the Bush administration has sought $8 million through 2005. The White House also altered the Web site so that the potential events to be considered by the market that were visible earlier in the day at www.policyanalysismarket.org could no longer be seen.

    But by that time, Republican officials in the Senate were privately shaking their heads over the planned trading. One top aide said he hoped that the Pentagon had a good explanation for it.

    The Pentagon, in defending the program, said such futures trading had proven effective in predicting other events like oil prices, elections and movie ticket sales.

    "Research indicates that markets are extremely efficient, effective and timely aggregators of dispersed and even hidden information," the Defense Department said in a statement. "Futures markets have proven themselves to be good at predicting such things as elections results; they are often better than expert opinions."

    According to descriptions given to Congress, available at the Web site and provided by the two senators, traders who register would deposit money into an account similar to a stock account and win or lose money based on predicting events.

    "For instance," Mr. Wyden said, "you may think early on that Prime Minister X is going to be assassinated. So you buy the futures contracts for 5 cents each. As more people begin to think the person's going to be assassinated, the cost of the contract could go up, to 50 cents.

    "The payoff if he's assassinated is $1 per future. So if it comes to pass, and those who bought at 5 cents make 95 cents. Those who bought at 50 cents make 50 cents."

    The senators also suggested that terrorists could participate because the traders' identities will be unknown.

    "This appears to encourage terrorists to participate, either to profit from their terrorist activities or to bet against them in order to mislead U.S. intelligence authorities," they said in a letter to Admiral Poindexter, the director of the Terrorism Information Awareness Office, which the opponents said had developed the idea.

    The initiative, called the Policy Analysis Market, is to begin registering up to 1,000 traders on Friday. It is the latest problem for the advanced projects agency, or Darpa, a Pentagon unit that has run into controversy for the Terrorism Information Office. Admiral Poindexter once described a sweeping electronic surveillance plan as a way of forestalling terrorism by tapping into computer databases to collect medical, travel, credit and financial records.

    Worried about the reach of the program, Congress this year prohibited what was called the Total Information Awareness program from being used against Americans. Its name was changed to the Terrorism Information Awareness program.

    This month, the Senate agreed to block all spending on the program. The House did not. Mr. Wyden said he hoped that the new disclosure about the trading program would be the death blow for Admiral Poindexter's plan.

    The Pentagon did not provide details of the program like how much money participants would have to deposit in accounts. Trading is to begin on Oct. 1, with the number of participants initially limited to 1,000 and possibly expanding to 10,000 by Jan. 1.

    "Involvement in this group prediction process should prove engaging and may prove profitable," the Web site said.

    The overview of the plan said the market would focus on the economic, civil and military futures of Egypt, Jordan, Iran, Iraq, Israel, Saudi Arabia, Syria and Turkey and the consequences of United States involvement with those nations. The creators of the market envision other trappings of existing markets like derivatives.

    In a statement, Darpa said the trading idea was "currently a small research program that faces a number of major technical challenges and uncertainties."

    "Chief among these," the agency said, "are: Can the market survive and will people continue to participate when U.S. authorities use it to prevent terrorist attacks? Can futures markets be manipulated by adversaries?"

    Mr. Dorgan and Mr. Wyden called for an immediate end to the project and said they would use its existence to justify cutting off financial support for the overall effort. In the letter to Admiral Poindexter, they called the initiative a "wasteful and absurd" use of tax dollars.

    "The American people want the federal government to use its resources enhancing our security, not gambling on it," the letter said.

  10. So, let's see, Al Quieda could go long, blow something up, take the profit and fund the next explosion ?
    #10     Jul 29, 2003