Was There Insider Trading on DSK News?

(Photo by Harold Cunningham/Getty Images)

A month ago, we ran a post featuring a handful of the latest odds on Intrade, including the chances (84% at the time) that Dominique Strauss-Kahn would be found guilty of at least one charge. Those odds have dropped below 10% in the last week, on the news that his accuser may have credibility issues. But when exactly did that price move start?
Reader Chris Reed wrote in asking us to look into the possibility that there was insider trading in the prediction markets on the DSK news. The initial New York Times piece that broke the story that the DSK trial was on the verge of collapse was first posted online Thursday night, June 30, before appearing on the front page of Friday’s paper.  The Times doesn’t time-stamp its articles, but the Huffington Post does. Their story linking to the Times piece is time-stamped 9:38 PM ET.
A quick look at Intrade’s closing price chart showing the odds of a Strauss-Kahn guilty verdict would seem to indicate that the price began to drop fairly early in the day on June 30, well before 9:38 PM:

But how fine-tuned is InTrade’s closing-price chart?
Let’s go one step further — to InTrade’s time and sales chart on the same trade. It shows that the initial price drop is time-stamped at exactly 9:38 PM on June 30. Sorry to disappoint. There certainly has been a lot of insider trading going around. But as for the DSK news, it appears to be nothing more than the (highly) efficient transfer of information to the markets.