
Wall Street Firm Uses Algorithms to Make Sports Betting Like Stock Trading - nsoonhui
http://www.wired.com/magazine/2010/11/ff_midas/all/1
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cletus
How is this news? Have they not heard of Betfair, which has been allowing this
kind of thing since 2000?

The only thing required to make betting like a market is for the gambler to be
able to take the bookie's side as well. Many bookie's use Betfair to hedge
their positions in fact.

In financial markets terms, a gambler is much like a prop trader. They're
betting on a particular position. That position, unlike a more traditional
financial instrument, will be the outcome of a race, game, etc. But this isn't
really all that different to, say, betting on oil futures.

A bookie on the other hand operates much like a spread trader. They (try to)
take a neutral position and just make money on the spread as the difference in
the odds between taking and making a bet is really a bid-ask spread.

~~~
gwern
> Have they not heard of Betfair, which has been allowing this kind of thing
> since 2000?

Is Betfair really the same thing? Everything I heard about it while reading
about prediction markets made it sound like the Vegas bookies that Cantor is
being contrasted against - a limited set of bets run at specific times. Not
arbitrary dynamically-generated bets at arbitrary times in the game. To me,
that's quite different. Like the difference between a video game which is a
shooter on rails, and _Halo_ with decent AI bots fighting you.

~~~
praxxis
In running and peer to peer betting (Betfair style) are indeed different. You
can place in run (live) bets on Betfair.

Interesting anecdote, apparently Betfair had one of the busiest Oracle
installs on the planet. They were (are?) creating some pretty neat
infrastructure to get away from it: [http://www.infoq.com/presentations/matt-
youill-betfair-flywh...](http://www.infoq.com/presentations/matt-youill-
betfair-flywheel-tradefair)

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ctkrohn
Cantor Fitzgerald, the firm in the article, previously tried to create a
market in box office futures:

[http://www.nytimes.com/2010/04/08/business/media/08futures.h...](http://www.nytimes.com/2010/04/08/business/media/08futures.html)

Cantor is a brokerage firm at heart -- I dealt with them frequently when I
worked on Wall Street. Their entire reason for existence is to match buyers
and sellers, and take a cut of the transaction. More markets to do so means
more money for Cantor.

~~~
GFischer
Something like a real-world Hollywood Stock Exchange?

<http://www.hsx.com/>

Used to play that a long time ago...

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lessthanideal
I've been to the M Casino. It's not entirely unique, because other casinos are
adding the "in game" betting using the same system, which was rolled out
initially at the M. This is very different from the normal sports betting
because you can bet during the game. Traditional bookmaking will take bets
before an event (sometimes even a long time before, for example, the winner of
next year's Super Bowl is already a bet you can make in Vegas) but not during
it.

I am not sure if a "in game" system ever existing before in Las Vegas casinos
to the extent that the M is doing it. The gambling radio shows seem to think
it's a novel thing.

I should add that this market (sports gambling) has long had "traders" (people
looking to arbitrage games and do other technical actions), "brokers" (people
who tell you what to bet on, similar to a stock broker) and "value" players
(in the betting case this is guys who look for an imbalance in value,
undervalued positions usually caused by too many people betting on one side of
a game, similar to Buffet looking for undervalued companies). Recently, I've
heard of one of these brokers advertising themselves as an investment group,
particularly to the extent that insider trading isn't illegal in gambling (for
example, if you have better information on the seriousness of a injury to a
key player you have inside information, but instead of it being illegal as it
would be in the stock market, it's actively encouraged).

This market is huge. I heard on the radio that Vegas did ~$85 million in bets
on the Super Bowl alone.

As a final note, if you don't think you're gambling when you put money into
the stock market, then I'm not sure what to tell you.

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dedward
Regarding insider information in sports betting - yup, no rules against it.
The professional gamblers who make a living betting share this kind of
information, there are secondary markets that distribute such information (for
a cost) etc..... These types of bettors, who generally win are interesting -
thier actions cause bookies to change their offerrings immediately. They are
on watch lists at various bookies. Bookies look for patterns of syndicate
betting (where one guy who's known to be a pro gets a bunch of others to get a
bunch of bets in as fast as they can before the bookies move the lines - and
the bookies are all watching each other, both in vegas and around the world).

Guys known to be pros also end up sometimes with different odds offered to
them, with lower limits than the average person as to how much they can bet,
etc.

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dedward
Well.. sports betting is basically a market where you buy and sell risk. (You
don't often sell at your traditional bookie, but you can hedge to not loose
too much).

At it's heart it's just a futures market - the instrument being bought is the
bet the bookie is offering you at that moment, and that's that.

There's a built in commission in the price you pay to bet. The offerings are
set based on both the bookie's view of overall market conditions (he wants
customers to bet with him, not with someone else) and his view of the outcome
of the wager. And idea book is balanced so that no matter who wins an event,
the losers pay the winners and the bookie keeps his 10%. In practice, this
generally doesn't happen, and, especially on big events, bookies and the
public don't see eye to eye.... there are outcomes in the game that mean the
bookie makes no money, or ends up losing quite a bit.

Various companies have presented this as both a person to person market, where
you can set up your own pricing and odds (betting exchanges) - and I recall
one (out of irealand I think?) that was actually set up like a real futures
market where you could buy/sell at any point.

From the professional bettor's point of view it might not look like the stock
market, but it's a market, and there area a lot fewer factors to take into
consideration than the stock market - so you get a lot of professional bettors
who win, consistently, season over season and make a living at this. All they
have to do is statistcally beat the bookies. They do their own calcualtions,
their own estimations, all that magic, and watch when the books open for a
place where they see an advantage. (The pros usually bet early when the odds
are posted, the guys who bet for fun bet up until the last second.)

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ojbyrne
As long as there's winners, losers, and a rake, it's gambling. I don't see a
buy and hold option.

~~~
jared314
With average "hold" times in the same range as spinning a roulette wheel, it's
all gambling.

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bmac27
I'm more interested in their ability (or the ability of the folks they partner
with for data processing) to pass along events in real-time; or at least close
enough to make a bet/prediction prior to the next play when even the official
web-based PBP apps of the four major sports (I.E. MLB at-bat, NHL Gamecenter
etc.) are often considerably behind the actual play.

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freddealmeida
I think what happened here is a shooting in the foot event. WS has always
tried to avoid that HFT and algo trading is not gambling. Or even vanilla or
more complex derivatives.

