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Betting exchanges
So i was reading a bit about betting exchanges and 'moving markets' on a thread elsewhere.
Presumably the opening markets on the exchanges open up somewhere in parallel to the general bookmakers odds, and it makes sense that prices will drift according to the market - but in terms of moving the market, is this refering only to the xchange or can lots of shrewd bets on the exchange 'tip off' regular bookmakers that they have got prices 'wrong'?
Comments
That's an interesting one Jim. It's all changed so much in the last 20 years.
It used to be that the exchanges would not even have the template ready for people to have a bet until mid-morning and then the bookmakers would issue prices on just some selected "early-price races" which were mostly handicaps. This changed around ten years ago to firms offering a price on every single horse in every race and these prices were the work of a group of very experienced odds-compilers employed by the major firms. These guys were well paid and it was a job that required specialist knowledge and experience (I did it for nine years). Newer firms joined the market offering mostly internet betting but they either couldn't afford the odds-compilers or found it difficult to find good ones so they simply waited until the others had put their prices up and copied.
In those days the exchange market would generally start to form based on what the prices the bookies went up with and they would largely copy them until market forces caused the outsiders to drift (due to something called favourite/longshot bias).
After a few more years it became obvious that the bookies could not keep tight control of their liabilities and they were spreading themselves too thinly. They were paying a lot to these compilers who would move prices around when shrewd winning customers, often with direct connections to the stables, had a bet. They now had to watch too many races though and with so many meetings in the summer it was impossible to put up "solid" prices that reflected the true chance of the horse winning and mistakes were made. Bookies were paying out a lot for expertise and still struggling to win on this business so they began to heavily restrict any winning clients more than they ever had before. Meanwhile the shrewd punters still wanted to get on so they approached the exchanges and suggested the markets be set up with a template, ready to take bets, the night before. The problem was now that the private individuals who decided to chance their arm and try and be their own little bookies by formulating prices overnight and injecting liquidity to the market found that it really wasn't that easy and as they all got their fingers burned the markets the night before got thinner and thinner.
The big bookmakers had made a decision though and it was one they couldn't go back on. They let go of their expensive odds-compilers and built tracking software that enabled a direct feed from the exchanges to formulate their prices. They employed just a few staff to make sure the machine didn't break and to try and look out for obvious signs of market manipulation and to restrict any accounts of people that could beat their system.
The problem they had now was that the decisions they were taking on setting the prices for a multi-billion industry were based on a set of prices to guide them which were knocked into shape by just a few hundred pounds. What happened now was that 16-18 hours before the races the markets would start to form as dozens of robots vied to edge prices out from 1/50 every runner until they reached a level where somebody wanted a bet. These robots would offer just £2 on each runner and as the £2 bets got matched they would assume they had the right price. In the early days of this period of overnight markets being formed by robots there would be a sudden burst of new activity throughout the morning and you could easily bet £300 on a 5/1 shot at 9.30am...again those individual market-makers who tried to lay every horse got burned and after a year or so the activity prior to noon totally dried up. It's 10.30am now and there is a decent race at Ludlow at 4.10...it's a competitive handicap and the prize money is good. The market has had just £15,000 matched...that would have been over £100k five years ago. If I choose to bet a 33/1 chance in the race it would take about £200 to force it down to 20/1 and that means the market is open to manipulation. On the favourite I can't get £500 at anything near the best price and so the whole benefit of the exchanges, that you get bigger prices, has gone for the recreational punter. clearly if I have inside knowledge that the price is too big and it's about to shorten massively then I don't care and I bet it anyway...it's a vicious circle and it makes it hard for the layers to win at this time of the day.
The answer to your question is that "the tail wags the dog" now. The bookies prices are practically set by the exchanges and move, often by robot, as the exchange moves. No notice is taken by some firms of a shrewd punter until after the race when accounts are restricted if a gamble is landed or if someone is simply a consistent winner.
Sky Bet actually have quite a smart guy heading up their racing and he is inclined to move prices if they see business from smart customers. It's an ever-changing game and I'm sure he is smart enough to know that just because a horse is 6.2-6.4 on an exchange it doesn't mean you can go 5/1 and let the first twenty customers bet whatever they want as you may be building your house on sand.
It would be interesting to see a day when the liquidity gets so low that the firms realise they can't depend on watching what is happening and shadowing the prices and that they need to pay for expertise again.
Right now the game is all about the last ten minutes when huge amounts are still matched and horses that were 7/4 in the morning are backed at 8/13 as if they are a certainty. Experience tells me that laying those horses is an expensive pastime although logic would suggest that the price has got too short.