DOD wsa embarrassed in Senate Hearings on July 29, 2003 (Wolfowitz was grilled) and the website was pulled that date.
See screenshots of Concept Overview and
Involved Organizations
Online Exchange Chooses Turmoil as a Commodity
In Bizarre U.S. Project, Traders To Bet on Events in Middle East
By SHAILAGH MURRAY
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON -- Senate Democrats are in an uproar about a new Pentagon project they're calling too bizarre to be true: an online futures exchange where the "commodities" are possible Middle East events such as the assassination of political leaders.
The intent of the project, called the Policy Analysis Market is to use "market-based techniques for avoiding surprise and predicting future events," according to a Pentagon report to Congress. One question posed in the Pentagon report: "Will terrorists attack Israel with bioweapons in the next year?" Traders would be those willing to bet their own money on when the events will occur.
Critics blasted the venture. Such a commodities market is "effectively an Internet casino," said Sen. Byron Dorgan (D., N.D.). He is seeking, along with colleagues, to thwart a Pentagon effort to secure $8 million to expand the project; the Pentagon already has spent about $750,000 to cover start-up costs.
The effort is loosely based on the Iowa Electronic Markets, a futures exchange run by the University of Iowa College of Business, that anticipates U.S. election results and Federal Reserve decisions. "You're sort of making up a form of commerce," says Charles Polk, president of Net Exchange, a 10-person firm founded by California Institute of Technology faculty members that designed the Middle East exchange and will operate it.
The Department of Defense's Defense Advanced Research Projects Agency, or Darpa, is funding the project but said it won't have access to traders" identities and funds (www.darpa.mil/iao/FutureMap.htm ). Mr. Polk said Net Exchange will acquire its underlying data from the Economists Group's Economist Intelligence Unit. The London-based Economists Group publishes the Economist magazine.
Here's how it would work. Traders could purchase one-year futures contracts that would assess possible economic, civil and military events in Egypt, Jordan, Iran, Iraq, Israel, Saudi Arabia, Syria and Turkey. As benchmarks of how well or poorly a country is faring, traders can nominate specific events, such as the overthrow of the King of Jordan or the assassination of Yasser Arafat. The contracts would set a specific date by which the event must occur, and traders would buy and sell based on what they think will happen. One example cited on the project's Web site: the U.S. will recognize Palestine in the first quarter of 2005.
Anyone can trade, according to the Web site, provided they register and deposit funds in a trading account. Organizers are especially keen to attract people with special knowledge or interest in the Middle East. "Whatever a prospective trader's interest...involvement in this group prediction process should prove engaging and may prove profitable," says the Web site, www.policyanalysismarket.org . [link does not work - website pulled down on July 29, 2003. See screenshots of Concept Overview and Involved Organizations - Traprock comment]
Democratic critics called the requirements for traders far too loose, possibly tempting terrorists to sign up. "It seems that terrorists even may be able to be protected as they play," said Sen. Ron Wyden (D., Ore.). "So the question is: Why wouldn't terrorists just hop online and start betting if they couldn't either mislead American authorities about their plans or make money to fund more al Qaeda operations?"
Darpa aims to sign up 10,000 traders by next January. While the Pentagon won't know the names of the traders, Net Exchange will -- and would report any suspicious activity, said Mr. Polk. Net Exchange hopes to line up 100 people to launch the service this fall. It will provide $100 to each of the founding traders to start an account.
There will be one big difference from traditional futures markets. No leverage will be allowed -- all trades must be fully funded when they are made, Mr. Polk said. Having fretted that interest would be low, he was bombarded with inquiries following a news conference Monday by Sens. Wyden and Dorgan. "I'm not worried about getting the 100 anymore," Mr. Polk said.
Write to Shailagh Murray at shailagh.murray@wsj.com
Updated July 29, 2003 12:52 a.m.
Page created July 22, 2003 by Charlie Jenks
