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Sunday, October 31, 2010

Exchange Wagering Can't Get Here Fast Enough

After last night, I have decided Exchange Wagering can't get to New Jersey fast enough.  Whether it is mid-year 2011 or later depending on legal fights, I plan on saying good bye to the parimutuel pools and head over to the exchanges as soon as it is becomes available to me.  Last night at the Meadowlands, was the final straw.

Watching the Meadowlands on TVG last night in the first race Meirs Hanover was 2-1 just before post time.  As soon as the race went off, Meirs Hanover was even money.  Okay, less than I hoped for but still acceptable.  Then, just before the field reached the half mile pole, the odds changed to 2-5; can anyone say "Crap"?  Visions of a $6 payoff became an acceptable $4 payoff before ending up as a $2.40 payoff.

Then came the third race where Rush Of Fools was 10-1 just before the race and again, when the race went off, the 10-1 odds dropped slightly to 9-1; still a great price for me.  Then came the dreaded half-mile pole and sure enough, by that time the odds dropped to 6-1.  My potential $20 pay off become $15.40 a cut of 23%.  If you were a $20 player that was looking at getting back $200, imagine your disappointment when you ended up collecting only $154.00.  I felt just as robbed as if I got hit by an NYCOTB surcharge.  Winning never felt so bad.  Is it any wonder why we have a hard time attracting new gamblers to racing?

Now, I know the drill; it has become quite rote.   "Wagering stops once the bell goes off.  What you are seeing is the last minute updating of the odds due to the money coming in from other simulcast and ADW locations, but you can rest assured no one was betting after the race started".  Then there is the line "Sure, in this case the odds went down, but there are times the odds on a horse goes up'.  And of course, we can't forget the infamous "I don't hear you complaining when you get paid more than what you thought you were getting" (sadly, I don't hear that one often enough).

Now, being someone who has been "improving the breed" for more years than I care to admit, I am going nowhere; I'll bide my time until exchange wagering shows up and I'll take my fixed odds payoff rather than dealing with the outdated parimutuel system.  Yes, there will be a chance I may have gotten a better payoff if I had waited longer or if I even bet through the parimutuels, but I'll take my chances; if nothing else, at least I will know what I will be getting if I win my bet.  It's bad enough you need to beat the takeout rate, but to also deal with the odds changing after the race is underway is more than anyone should have to deal with.  After all, if I feel like I am be cheated, what are novices or potential gamblers going to be thinking?

You will hear industry insiders bemoan the real or perceived integrity issues in horse racing, but the one issue they ignore is the perceived lack of  integrity with the tote system.  You can tell people there is no past posting but all they see is the odds dropping significantly after the race starts and they can't help but wonder if the tote system is being manipulated. 

One way the problem can be fixed is the closing of the mutuel pools before the starting car begins moving; perhaps at a specified time.  The track operators will tell you that would cost them huge amounts of money as the large gamblers bet at the very last moment (as they still will when the last moment comes earlier).  In fairness, there probably would be some loss of wagering by those who wait to see which horses may be going off stride beforehand but that may be somewhat offset by more wagering due to the tote system being perceived as secure.  Sure odds may still drop at the last moment but if the odds dropped before the race began, at least people would feel they are be treated fairly.  Realizing that will not happen, the horse racing industry must work with tote vendors to develop a way to process last minute wagers much faster so it doesn't seem the computers being used are Commadore 64s.  Or the industry can do nothing and eventually bemoan the flight of money from the parimutuel pools into the exchange market.


Scott Jeffreys said...

Dear Pacingguy : Your call for exchange wagering is in response to the fact that parimutuel pool pricing is only fixed at one point, the final flash. (Exchange wagering fixes your price at the point of execution thereby creating an infinite spectrum of strike points for pricing.)

Some ideas worth considering that I have been writing about recently in order to "save" parimutuel betting:

[1] What if there were multiple parimutuel pools on a single race for "win"? Rather than multiple pools, multiple close points? Suppose you have one pool close ten minute before post time in order to change the picture of last minute wagers just at post time?

[2] Suppose that on a given horse, more than x% of what had been previously wagered could not be accepted as a bet on that horse in the last 60 seconds of wagering? This would force money into the pools earlier. A good example here would be where $5,000 was wagered on a horse with a $20,000 total win pool two minutes before post time. Here, we have a horse paying $6.50 for win with an 18% rake. Suppose that no wager in excess of 2% of the win wagers on that horse could be accepted in one ticket ($100). This would potentially even the flow of wagers during the final minute. To avoid that single $15,000 wager coming into that pool allowing $20,000 to win on the favorite, swelling the pool to $35,000, but dropping your price to $2.80.

[3] The fact that the Meadowlands pools have so severely thinned is exaggerating your last minute price drops. Making these pools more liquid means DECREASING the number of wagering options ... and therefore decreasing the number of harness tracks running.

Just some ideas to try and force smoother wagering in parimutuel pools. No matter what happens, the real difference is that you have, speaking mathematically, "discrete" points in parimutuel wagering while the exchange model is "continuous". Ultimately, this transparency favors the exchange market (as you can see from automated trading on NASDAQ as opposed to the old broker model on NYSE).

Sad but true - but there are some days that I really miss the old cardboard tickets, the separation of cashiers and sellers, and the need to get onto a different line for your Win and Exacta tickets.


Pacingguy said...

Scott, I like the first idea. However with the need to speed up races, I don't know how many pools you can have. Perhaps two pools per race with the first one closing after five minutes. However, this will work only at tracks with sufficient handle (WEG and Meadowlands).

The problem with the second idea is a lot of wagering occurs through ADWs and I am sure some of the ADWs will come up with a way to take someone's request to wager over the proposed limit by splitting thier bets up. At the track, it could work.

Cutting the number of pools may not be a bad idea as there are only so many dollars available for wagering so you dilute the individual pools.

My biggest problem is with the odds changing after the race begins. If we had a 7:00pm race at the Meadowlands and the pools closed at 7:00pm, there would be enough time to get the final odds by the time the race actually goes off. The heavy hitters will learn to bet according to the stated post time.

Phil J. said...

Funny you bring this up. Friday night at the Big M I made a pretty significant bet on Capri Hanover. Certainly not my type of bet but every once in a while, I'll see a horse at 4/5 or 1/1 that I think is value and she was such a horse.

She may have been 6/5 or so at one point, but with 1 and 2 mins on to post on the board, she was 1/1. More than acceptable. I figured the post and the first division of the series had people a bit nervous about how she would be handled from the gate.

They leave the gate and she drops to 4/5 ... ok, I can accept that. Not a huge drop by any means and she should have been 1/5 or 2/5 in my opinion. Tetrick leaves, lands in 4th. As they had down the backstretch, she drops to 2/5.

It was almost as if someone saw Tetrick leave and said "Yeah, from that spot she can't lose" and unloaded on her. Hmmm ...

So what I thought may be $4.00 was than $3.60 or $3.80 and ultimately paid $2.80.

Scott Jeffreys said...

Dear Pacingguy and PhilJ : Having worked on Wall Street for 20 years where the latency between a trade executing on the floor or electronically and being placed into the update ticker was less than two seconds in total. The information traffic rates on the Wall Street ticker backbones far outstrips the parimutuel traffic.

Armed with this, you have to ask yourself a simple technical question : why are the odds only recalculating once every 30 seconds? Why are the transfers NOT happening between the ADWs and hubs on a REAL TIME BASIS? Why are the odds not updating ONCE EVERY SECOND since it is a fairly simple calculation to make.

This is not rocket science. It is impossible for me to believe that Scientific Games cannot solve this problem. As a financial software model, this is incredibly simple stuff.

Sincerely, Scott

Scott Jeffreys said...

Dear Pacingguy : One final thought about decreasing the number of pools. Do we really need doubles, exactas, triples, superfectas, pick-3s, pick-4s and who knows what else all running on the same races ... atop the win, place, and show pools?

Let's think about this. How many vertical or horizontal wagers do you need in the same race? Exactas and doubles have become staples alongside the WPS pools. Do you need triples on every race? Supers on top of triples? Pick-3s overlapping Pick-4s?

Maybe, just maybe, the technology IS PART OF THE PROBLEM in producing these illiquid pools.

Sincerely, Scott

Pacingguy said...

Absolutely, there is too many different pools in each race. Here is the way I would set up the pools. Let's assume a twelve race card.

WPS, Exactas and Triples each race (triples have become staples as well). Other Exotics:

Daily Double - Races 1-2, 6-7, 11-12
Pick-3 - Races 3-4-5; Races 8-9-10
Pick-4 - Races 4-5-6-7
Pick-6 - Races 7-8-9-10-11-12
Superfecta - Races 3, 7, 11, 12

You need to limit the number of Pick-4s, Pick-6s, and Superfectas. Sure they have the potential to produce lottery-sized pay-offs, but they also kill turn-over for the handle. The money which goes into these pools are lost with respect to churn thus killing handle. There is a balance which needs to found between lottery-sized pay-offs and handle churn.

Slewodreams said...


I have worked in the industry on and off, including as a teller. As a Wall Street guy, you must know a lot more about the tech aspect of betting then I do, but I can tell you flat out that the entire tote system in this country needs to be revamped.

I've heard from people that the tote systems at hosts (i. e. the tracks) can't operate at max speed because they have to accommodate the remote locations whose equipment is outdated and much slower. In other words, the system has to operate at the slowest speed in the tote market in order to keep all betting outlets functional. I don't know how true this is, but it sounds like using a Cadillac engine to run a Toyota. Imagine Santa Anita, Del Mar, NYRA, the Meadowlands, all having the most up-to-date servers yet it all has to be slowed down for a few places in the middle of nowhere to get their bets in. I wouldn't be surprised if there are shops that are still using phone lines to exchange information with the host tracks. Or maybe two cups on a string.

The tote network that we currently have is a hodgepodge of up-to-date systems and very old systems. There are many off-track sites that I know are using tote equipment from 10-15 years ago. I punched tickets on this equipment myself a few years back and the last I checked, the same equipment is there now. I can say, for example, that their wagering logs are printed with a dot matrix on sheets of greenbar. How can the public be sure that pools are safe when outdated junk like this is being used?

I'm led to think that tote security is taken 100% seriously by racetracks only on a big race day like the Kentucky Derby or the Hambletonian - otherwise there is little or no security in the pools. If there is no chance of a scandal breaking out, no one cares. Everybody who's working at these places knows that the pools are wide open to past posting and hackers, but everyone keeps driving home with a check and pretending that everything is fine. And if there is anyone who has something to say about it, well, no points for guessing if he'll still be employed or not.

The state commissions needed to do something about this years ago, especially after the Fix-6 scandal at the Breeders Cup (one time that it did get out), but little if anything has been done. Casinos are now making the lion's share of profits at tracks, so the powers that be are most likely sweeping this under the rug while players get shafted on a daily basis.

Exchange wagering is an exciting idea and I would like to see it in the U. S. But I don't agree with people who say that the parimutuel system is outdated. The problem is that the equipment of the system is outdated and needs to be changed, fast. The entire network needs to be standardized and if a national commission to regulate the sport is ever formed (HAHAHAHAHA are you kidding), every bet in this country needs to pass through a central database where every transaction in the country can be tracked. When people screw around on Wall Street, the FBI comes after them. Why should racing be any different?

They also need to find whoever it is that's messing around with these pools. I don't know how they can do this without starting a witch hunt, but there is no way that all of these drops in prices after the start and finish of a race are happening because of late simo money. Someone, somewhere is either punching tickets because the tote hasn't shut off or a technician is in places where he doesn't belong. It took a bunch of guys from that Drexel frat to make this public and it happened completely by accident. They might very well have been busting into Pick 6s today if they knew enough to not key their horses.

After the past posting at Penn National and Hollywood recently, it's pretty clear (at least to me) that there are serious problems here and the tracks aren't equipped to deal with them. But this was said long ago and it's the same old thing.

phil j. said...

It has been a few years but i used to frequent the philly park turf clubs. They have or had an account wagering system called phone bet. At the track and in the turf clubs you could do all of your betting through a device called a tiny tim. It was just small hand held electrical device with a screen. The screen would pop up notices when each track would lock at the start of a race. It was at least a once or twice a week occurrence to see a race not get locked until halfway or three quarters of the way through.

Scott Jeffreys said...

Dear Slewodreams : Yours was an excellent post dealing with more detailed issues in the hardware and network areas than most readers are familiar - but your post is absolutely true.

In the financial markets, much effort is spent creating a level playing field - all updates are available to all endpoint users within the same timeframe (within hundreds of milliseconds).

Now, your note calls for a PRIVATE system between the major racetracks who are looking to host a serious wagering network. This is an important topic and one that I would personally love to see turned into a blog topic for Pacingguy. Updates from Scientific Games, usually closed mouthed on the topic of performance and security, are critical in this space.

This has been great conversation on a serious topic.

Sincerely, Scott