Wall Street Firm Uses Algorithms to Make Sports Betting Like Stock Trading

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.

http://www.nytimes.com/2010/04/08/business/media/08futures.h...

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.

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.

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.)