Today ClarusFT (and OTC Space) announce the result of our competition to predict the impact of the Dodd-Frank Act mandatory clearing deadline of June 10th. The question we posed was the following:
What do you predict will be the gross notional remaining of Uncleared USD IR Swaps FixedFloat in the week of 10th – 14th June 2013, as reported to the USD Swaps Data Repository (DDR)?
Now the actual data, is in we can see the figure is $33.2 billion as in the screen shot below. (click to enlarge)
I am pleased to announce that the winner is Rumman Iqbal of Deloitte & Touche LLC, with an entry that was within $85 million of the result! Well done Rumman. The prize of a Nexus 7 will be winging its way to you.
In the end we received 17 entries to the competition, which was surprising given the competition had hundreds of page views in the 2 week competition period.
So a few observations and lessons:
- The discounted probability weighted payout for the competition was $14.
- This compares very favourably with the UK National Lottery figure of 70 cents or 85 cents including entry.
- First lesson, it pays to enter our competitions.
- Even if one assigns zero value to the intellectual stimulation.
Next, what of the maxim to trust in the wisdom of crowds.
- We announced on June 3, that the crowd consensus prediction was $36.7 billion.
- In our small crowd of 17 entries, there were 7 entries closer to the result and 10 further away.
- So if you had relied on one of the entries at random as your prediction, your odds would have been 41% of picking a better estimate and 59% of a worse one. (Presumably more entries would have improved these odds in favour of the the crowd).
- While picking the consensus would not have won you the competition, it would have saved you from the ignominy of $12 billion or $100 billion!
- Second lesson, going with the consensus may not make you the best, but it is the safe choice.
Some finer points.
- Our consensus prediction was a drop in notional of 27% to a daily average of $7 billion or a reduction from 275 to 180 trades. This has been shown to be largely borne out as the daily average has been $6.6 billion and 173 trades.
- In the screen shot, you may have noticed above the text “Actual notionals are higher than stated, as block trade rules allow for capped notionals”. This has no impact on the competition, as it has always been true in the public disseminated data from DTCC DDR, only the text is new.
- In-fact you will see in SDR View that we now default all the views to trade counts instead of gross notional. We still allow you to change the display to notional, which also brings up the text, so you are aware that the actual notionals are higher. I will publish a post later this week on the impact of capped notionals.
It just remains for me to thank all of you who entered and all of you who took the time to read this series of blog posts.
Remember the first and second lesson.
And don’t forget the finer points.