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This seems pretty fine to me. Laws forbade publishing exit pools until 10pm, so hedge funds conducted their own research independently to have better informati

This seems pretty fine to me. Laws forbade publishing exit pools until 10pm, so hedge funds conducted their own research independently to have better information. That's kind of how it is supposed to work. Bad laws/regulations preventing accurate information dissemination lead to financial incentives for those with the most accurate/up-to-date data. I know HN isn't the most Hedge Fund friendly forum, but surely there's an appreciation here for these funds' efficiency and ability to seize opportunity.

leonk 8y ago
Isn't the article's main concern the conflict of interest when polling companies release both public and private polls? They have an incentive to release inaccurate results to the public in order to benefit their private clients even further.
- dantillberg 8y ago
  Polling companies have an incentive already to create inaccurate polls by structuring the questions cleverly. Regulation will never do away with that.
  - jonathankoren 8y ago
    Not every poll is a push poll. Push polls aren’t even polls. They’re just advertising.
    - pessimizer 8y ago
      There is no definitive difference between a push poll and a poll that is not a push poll. There are shameless push polls, but objective published polls are about as likely as objective public news; I'd need an existence proof for either. Published polls on how people say they will vote have virtually no utility for the vast majority of individuals. A small minority of individuals may need to plan for contingencies based on the likelihood of a particular result, but that utility drops drastically the shorter the planning window gets (i.e. the closer the vote is), which might be somewhat offset by a possibly greater accuracy. But instead of slowing as the date arrives, the polls get faster and faster. However, the utility of a "push" poll goes up closer to the vote, because voters will have less opportunity to review and correct misimpressions that the poll gave them. Hence the time between polls goes to zero as time to the vote approaches zero, and why some governments feel that they have to step in to create a prohibited window before a vote. Also, a traditional definition of a "push" poll is one that is meant to change the minds of the people taking the poll, but more effective in many circumstances, and definitely more common (because it is cheaper) is a poll which uses strange phrasing to get results that can be reported (after being carefully framed in a press release) in a way that implies far greater support or opposition for something that would be indicated by a more direct questioning. The fact that every vote is to some extent a Keynesian beauty contest, even if that's simply because people are convinced by ad populum and question themselves if they see that the crowd disagrees with them, means that even an "objective" poll would push.
      - jonathankoren 8y ago
        There’s a lot to unpack here, but you seem to misunderstand why election polls are reported, and reported more frequently the closer it gets to Election Day. Tracking polls aren’t for informing some secret cabal, or even to inform. It’s the horse race. It sells papers. But there’s nothing biased about “Is the country on the right track, or the wrong track?”
  - Swenrekcah 8y ago
    I don’t understand how those incentives would work. Could you elaborate?
    - mrec 8y ago
      Pollsters normally have a good idea what answer their customer wants to hear. Those who deliver that answer get more business.
      - warkdarrior 8y ago
        Yes, until their customer sees that the poll results do not match reality.
        mrec 8y ago
        Polls aren't always about matching reality. They're often used as ammunition in an argument - "Look, the majority supports my position!" The classic example is https://www.youtube.com/watch?v=G0ZZJXw4MTA https://www.youtube.com/watch?v=G0ZZJXw4MTA
  - eftpotrm 8y ago
    Political polling is a tiny percentage of their business; they mostly do market research for corporates. Every few years, polls get verified against reality at the ballot box. If you're running a polling company, would you want to sell your market research as the company whose polls were some way off the votes they'd just seen counted because you were trying to influence the electorate?
notahacker 8y ago
Except the article clearly explains that it was less "hedge funds conduct[ing] their own research independently to have better information" and more hedge funds buying early access to the polls not permitted to be released until 10pm in order to front run people speculating on them, and that doing so was a legal grey area. Sure, the people buying and selling "private" exit polls did so openly with confidence they wouldn't be prosecuted, but that doesn't mean what they were doing ought to have been legal or the original drafters of the law had intended to permit it. The safe profits weren't in trusting the polls were accurate information, but in putting big money on their predictions before most speculators were allowed to see them and taking [most of] it off at a profit when they were revealed on TV. That's really far too basic a strategy to deserve appreciation. Throw in the article's [much more speculative] suggestions that pollsters' TV statements about the confidence of their results might have been influenced by their paying customers' strategies, and the suggestion Farage "conceded" whilst expecting to win because he wanted to bet against the people who trusted he was making an honest assessment based on good information. Neither would be likely to be illegal - people aren't obliged to be honest on TV and don't have fiduciary duties to holders of sterling - but both would be difficult to call ethical. That said, it's entirely plausible those individuals did honestly believe what they were saying at the time. Everybody expected it to be close, and as the article acknowledges, one of the reliable big pollsters' exit polls gave the wrong result.
- jonknee 8y ago
  > not permitted to be released until 10pm in order to front run people speculating on them Exit polls are held back not for trading purposes, but so that people go to the polls and vote. If people think they know the result they won't go through the hassle of voting.
  - osrec 8y ago
    Or if they know it's close, then it might spur them on to vote for their desired result...
    - fjp 8y ago
lordnacho 8y ago
> Inside YouGov, concerns about the law limited the company's potential offerings, according to an email that YouGov founder Stephan Shakespeare shared with Bloomberg. YouGov’s chief financial officer spoke to lawyers and decided that a single hedge fund could not be considered “a section of the public” but that multiple hedge funds getting the same exit poll might cross the line. Other polling companies appear to have interpreted the law differently. It's a grey zone whether releasing the private poll data broke the law. What seems clear is the law hasn't caught up with the technological realities. Also the other main point of the article was that it is questionable whether it is appropriate to use polling data to influence the markets, like Farage has potentially done. They claim he knew which way it way going, contrary to public data. It's also clear that he was one of the figureheads of the Leave campaign, and thus his concession would carry weight. One could see how this might be interpreted as a form of manipulation. It's not claimed in the article, but he could well have talked up Sterling in order to short it at a better level.
- Armisael16 8y ago
  >What seems clear is the law hasn't caught up with the technological realities. How is this a 'technological progress' problem? Exit polls existed before this law as did phones. Polling agencies have been able to release data before polls close for the better part of a century. This is just a vague poorly-worded law.
deleted 8y ago
[deleted]
talltimtom 8y ago
The laws also forbid sharing inside information, yet if you have a company conducts its own “research” to discover inside information from others before its published that doesn’t make it legal. The point of many trading laws is to prevent trading based on non public information. Privately conducted polls on political votes is definately non-public information, and in order for them to trade based on them they should publish first, which would likely also deminish the returns since suddenly they aren’t the only ones aware of the public/poll disconnect.
- marcoperaza 8y ago
  At least in the US, trading based on non-public information is totally fine, unless trading on it would violate a duty of trust to the source of the information [1] (which can be indirect, e.g. an employee tells his wife about some insider information: she had a duty of trust to him, and he to the company/shareholders, so she can be prosecuted for trading on that.) The savvy prediction of events exogenous to a company’s operations is very much not insider trading. [1] It’s a little more complicated, but I think this is as good a succinct formulation as one can hope for.
  - joshuamorton 8y ago
    Indeed, there's an article I recall reading (here on HN I think, but I can't find it) that was about, essentially, a person who would short companies (I think specifically pharma companies) and then publish negative articles about them. Think "company A's research about xyz drug is false and misleading". This wasn't fraud because these articles were true. This is entirely legal. Indeed, there's arguments to be made that this should be encouraged, since it indirectly provides a financial incentive for people to do research into firms and keep the market fully informed. Of course, you have to have a very specific savvy to gain from that kind of scheme, but still.
    - goodcanadian 8y ago
      Well, market manipulation is illegal. If the articles are true (factual), the activity is probably OK, but if the individual is making up rumours with the primary goal of affecting the market to profit from it, that is definitely illegal.
pluma 8y ago
I guess you mean "fine" as in "legal", not "fine" as in "ethically unobjectionable".
- nabla9 8y ago
  What is unethical about it? The reason publishing poll results is forbidden because they could affect the outcome of the election. If you do polls only for private use that's not the case.
- umanwizard 8y ago
  What is ethically objectionable about rich people gambling against other rich people, and some of them winning? It's not like these funds stole money directly from normal people.
  - mruts 8y ago
    In fact the money probably benefited some normal people. Tons of university endowments, sovereign wealth funds, and pension funds invest in hedge funds.
    - ben_w 8y ago
      Given where the money they won comes from, surely an equal value (plus overhead) was lost by similar organisations?
- mruts 8y ago
  Care to explain what you find is objectionable about this? I love stuff like this. Finance is an art.
gpderetta 8y ago
By trading on this private information on the public market, one could argue they did indirectly disseminate the information though, which would be explicitly illegal. Edit: because the direction of the trades would be publicly visible and highly correlated with the poll results.
willyt 8y ago
But surely if it's possible to make £500 million in one day, that's quite a big incentive to artificially 'twang' the markets because hedge funds profit from instability no? If you throw a rock in a pond there are lots of short term fluctuations. I mean, how expensive was all that Cambridge Analytica stuff in comparison to how much money could be made from this?
- repolfx 8y ago
  Hedge funds don't profit from generic 'instability'. They profit from correctly anticipating market movements, which isn't the same thing. Apply a truly random force to market prices and hedge funds will average out to break even. There were certainly plenty of financial institutions that got it wrong and lost money as a result of betting on Remain too.
  - willyt 8y ago
    Yes true, but if there's no instability then there is no opportunity; there are no losers, but also no winners. EDIT: Also by analysing FX market movements in relation to polling in the weeks and months leading up, it wouldn't be hard to make a correlation between Leave and lower priced GBP. All the economic institutions were saying Leave would be bad for the UK economy, so a leave vote is bound to shake confidence in GBP.
  - mikeash 8y ago
    Aren’t there ways to set up a bet that a particular price will move, where you profit if it goes up or down but lose out if it stays the same? If you can cause instability then that could be used to profit from it even if you don’t know which way it will go. Some quick searching tells me this is called a “long straddle” but I could be way off.

leonk 8y ago

Isn't the article's main concern the conflict of interest when polling companies release both public and private polls? They have an incentive to release inaccurate results to the public in order to benefit their private clients even further.

dantillberg 8y ago
Polling companies have an incentive already to create inaccurate polls by structuring the questions cleverly. Regulation will never do away with that.
- jonathankoren 8y ago
  Not every poll is a push poll. Push polls aren’t even polls. They’re just advertising.
  - pessimizer 8y ago
    There is no definitive difference between a push poll and a poll that is not a push poll. There are shameless push polls, but objective published polls are about as likely as objective public news; I'd need an existence proof for either. Published polls on how people say they will vote have virtually no utility for the vast majority of individuals. A small minority of individuals may need to plan for contingencies based on the likelihood of a particular result, but that utility drops drastically the shorter the planning window gets (i.e. the closer the vote is), which might be somewhat offset by a possibly greater accuracy. But instead of slowing as the date arrives, the polls get faster and faster. However, the utility of a "push" poll goes up closer to the vote, because voters will have less opportunity to review and correct misimpressions that the poll gave them. Hence the time between polls goes to zero as time to the vote approaches zero, and why some governments feel that they have to step in to create a prohibited window before a vote. Also, a traditional definition of a "push" poll is one that is meant to change the minds of the people taking the poll, but more effective in many circumstances, and definitely more common (because it is cheaper) is a poll which uses strange phrasing to get results that can be reported (after being carefully framed in a press release) in a way that implies far greater support or opposition for something that would be indicated by a more direct questioning. The fact that every vote is to some extent a Keynesian beauty contest, even if that's simply because people are convinced by ad populum and question themselves if they see that the crowd disagrees with them, means that even an "objective" poll would push.
    - jonathankoren 8y ago
      There’s a lot to unpack here, but you seem to misunderstand why election polls are reported, and reported more frequently the closer it gets to Election Day. Tracking polls aren’t for informing some secret cabal, or even to inform. It’s the horse race. It sells papers. But there’s nothing biased about “Is the country on the right track, or the wrong track?”
- Swenrekcah 8y ago
  I don’t understand how those incentives would work. Could you elaborate?
  - mrec 8y ago
    Pollsters normally have a good idea what answer their customer wants to hear. Those who deliver that answer get more business.
    - warkdarrior 8y ago
      Yes, until their customer sees that the poll results do not match reality.
      - mrec 8y ago
        Polls aren't always about matching reality. They're often used as ammunition in an argument - "Look, the majority supports my position!" The classic example is https://www.youtube.com/watch?v=G0ZZJXw4MTA https://www.youtube.com/watch?v=G0ZZJXw4MTA
- eftpotrm 8y ago
  Political polling is a tiny percentage of their business; they mostly do market research for corporates. Every few years, polls get verified against reality at the ballot box. If you're running a polling company, would you want to sell your market research as the company whose polls were some way off the votes they'd just seen counted because you were trying to influence the electorate?

notahacker 8y ago

Except the article clearly explains that it was less "hedge funds conduct[ing] their own research independently to have better information" and more hedge funds buying early access to the polls not permitted to be released until 10pm in order to front run people speculating on them, and that doing so was a legal grey area. Sure, the people buying and selling "private" exit polls did so openly with confidence they wouldn't be prosecuted, but that doesn't mean what they were doing ought to have been legal or the original drafters of the law had intended to permit it. The safe profits weren't in trusting the polls were accurate information, but in putting big money on their predictions before most speculators were allowed to see them and taking [most of] it off at a profit when they were revealed on TV. That's really far too basic a strategy to deserve appreciation. Throw in the article's [much more speculative] suggestions that pollsters' TV statements about the confidence of their results might have been influenced by their paying customers' strategies, and the suggestion Farage "conceded" whilst expecting to win because he wanted to bet against the people who trusted he was making an honest assessment based on good information. Neither would be likely to be illegal - people aren't obliged to be honest on TV and don't have fiduciary duties to holders of sterling - but both would be difficult to call ethical. That said, it's entirely plausible those individuals did honestly believe what they were saying at the time. Everybody expected it to be close, and as the article acknowledges, one of the reliable big pollsters' exit polls gave the wrong result.

jonknee 8y ago
> not permitted to be released until 10pm in order to front run people speculating on them Exit polls are held back not for trading purposes, but so that people go to the polls and vote. If people think they know the result they won't go through the hassle of voting.
- osrec 8y ago
  Or if they know it's close, then it might spur them on to vote for their desired result...
  - fjp 8y ago

lordnacho 8y ago

> Inside YouGov, concerns about the law limited the company's potential offerings, according to an email that YouGov founder Stephan Shakespeare shared with Bloomberg. YouGov’s chief financial officer spoke to lawyers and decided that a single hedge fund could not be considered “a section of the public” but that multiple hedge funds getting the same exit poll might cross the line. Other polling companies appear to have interpreted the law differently. It's a grey zone whether releasing the private poll data broke the law. What seems clear is the law hasn't caught up with the technological realities. Also the other main point of the article was that it is questionable whether it is appropriate to use polling data to influence the markets, like Farage has potentially done. They claim he knew which way it way going, contrary to public data. It's also clear that he was one of the figureheads of the Leave campaign, and thus his concession would carry weight. One could see how this might be interpreted as a form of manipulation. It's not claimed in the article, but he could well have talked up Sterling in order to short it at a better level.

Armisael16 8y ago
>What seems clear is the law hasn't caught up with the technological realities. How is this a 'technological progress' problem? Exit polls existed before this law as did phones. Polling agencies have been able to release data before polls close for the better part of a century. This is just a vague poorly-worded law.

deleted 8y ago

[deleted]

talltimtom 8y ago

The laws also forbid sharing inside information, yet if you have a company conducts its own “research” to discover inside information from others before its published that doesn’t make it legal. The point of many trading laws is to prevent trading based on non public information. Privately conducted polls on political votes is definately non-public information, and in order for them to trade based on them they should publish first, which would likely also deminish the returns since suddenly they aren’t the only ones aware of the public/poll disconnect.

marcoperaza 8y ago
At least in the US, trading based on non-public information is totally fine, unless trading on it would violate a duty of trust to the source of the information [1] (which can be indirect, e.g. an employee tells his wife about some insider information: she had a duty of trust to him, and he to the company/shareholders, so she can be prosecuted for trading on that.) The savvy prediction of events exogenous to a company’s operations is very much not insider trading. [1] It’s a little more complicated, but I think this is as good a succinct formulation as one can hope for.
- joshuamorton 8y ago
  Indeed, there's an article I recall reading (here on HN I think, but I can't find it) that was about, essentially, a person who would short companies (I think specifically pharma companies) and then publish negative articles about them. Think "company A's research about xyz drug is false and misleading". This wasn't fraud because these articles were true. This is entirely legal. Indeed, there's arguments to be made that this should be encouraged, since it indirectly provides a financial incentive for people to do research into firms and keep the market fully informed. Of course, you have to have a very specific savvy to gain from that kind of scheme, but still.
  - goodcanadian 8y ago
    Well, market manipulation is illegal. If the articles are true (factual), the activity is probably OK, but if the individual is making up rumours with the primary goal of affecting the market to profit from it, that is definitely illegal.

pluma 8y ago

I guess you mean "fine" as in "legal", not "fine" as in "ethically unobjectionable".

nabla9 8y ago
What is unethical about it? The reason publishing poll results is forbidden because they could affect the outcome of the election. If you do polls only for private use that's not the case.
umanwizard 8y ago
What is ethically objectionable about rich people gambling against other rich people, and some of them winning? It's not like these funds stole money directly from normal people.
- mruts 8y ago
  In fact the money probably benefited some normal people. Tons of university endowments, sovereign wealth funds, and pension funds invest in hedge funds.
  - ben_w 8y ago
    Given where the money they won comes from, surely an equal value (plus overhead) was lost by similar organisations?
mruts 8y ago
Care to explain what you find is objectionable about this? I love stuff like this. Finance is an art.

gpderetta 8y ago

By trading on this private information on the public market, one could argue they did indirectly disseminate the information though, which would be explicitly illegal. Edit: because the direction of the trades would be publicly visible and highly correlated with the poll results.

willyt 8y ago

But surely if it's possible to make £500 million in one day, that's quite a big incentive to artificially 'twang' the markets because hedge funds profit from instability no? If you throw a rock in a pond there are lots of short term fluctuations. I mean, how expensive was all that Cambridge Analytica stuff in comparison to how much money could be made from this?

repolfx 8y ago
Hedge funds don't profit from generic 'instability'. They profit from correctly anticipating market movements, which isn't the same thing. Apply a truly random force to market prices and hedge funds will average out to break even. There were certainly plenty of financial institutions that got it wrong and lost money as a result of betting on Remain too.
- willyt 8y ago
  Yes true, but if there's no instability then there is no opportunity; there are no losers, but also no winners. EDIT: Also by analysing FX market movements in relation to polling in the weeks and months leading up, it wouldn't be hard to make a correlation between Leave and lower priced GBP. All the economic institutions were saying Leave would be bad for the UK economy, so a leave vote is bound to shake confidence in GBP.
- mikeash 8y ago
  Aren’t there ways to set up a bet that a particular price will move, where you profit if it goes up or down but lose out if it stays the same? If you can cause instability then that could be used to profit from it even if you don’t know which way it will go. Some quick searching tells me this is called a “long straddle” but I could be way off.