Bomber??

[steven1976]

If it boils down to someone using their bank to control the markets. Quite possibly, yes!

[Zenyatta]

Has our explosives expert {bomber} transformed into a demolitionist
lots of favorites were drifting today

Any time I see a big move of any kind I'm thinking 'is it him?... is it the bomber?' We can imagine some guy sky high on drugs suddendly deciding on a whim to start laying everything just when everyone has loaded thousands on expecting the back...

[steven1976]

Or they have made/ set up the market early on, on both sides of the book and as soon as a worth while amount of money comes in on either side of the ladder they just push through that money and their own money on either side of the market until initiating the swing? If it was mainly their money on both sides of the book (early on say ten mins out) they could just push the odds to a position they liked?

[Mr Undercover]

Hi Hgodden - I work in the industry, I know how the trading floors operate, I've been involved with a few, and have experience of working with BF on their access to the exchange policy - it's a very controvertial area.

Suffice to say all the trading floors in the major high streets and online bookies have exchange accounts. You are right, they do carry the majority of risk themselves (it's where the profit is) however when there is a spike of liability beyond a theshold, typically on a favourite, they will look to balance the book by passing on liability. A trader will be given an instruction of a certain amount, a block of money typically multiple of 5k but 25k would probably fit with a big high street (bear in mind it's only the spike beyond the theshold they'll be looking to remove). Mostly this money will be bled slowly into the market and we might not notice it.

My theory, which could be completely wrong, is that an inexperienced trader is simply dumping too much too quickly. If for example the bookie was offering 5.0 on a horse and betfair 6.0 he'll be happy to take anything that averages above 5.0 which would explain the rash behaviour and why he always attempts to get his entire amount matched.

This said, I'm reading reports of laying activity which doesn't really fit if the same guy.

The in-play activity is completely bizarre and looks more likely to be a big on-course trader in my view.

This is all conjecture and just my opinion but I do hope it is an inept trader for a big bookie because it'll carry on for sometime yet.

[Ferru123]

Hi Mr Undercover

Do the bookies know what the true odds of a horse are?

If so, would they sometimes back on Betfair under those odds, in order to limit their liability?

Also, would you say that bookies move prices on Betfair, or is it the other way around?

Thanks

Jeff

[Mr Undercover]

Hi Ferru123,

Do the bookies know the true odds of a horse? Absolutely! they monitor the exchanges minute to minute particularly at the business end of the day. As you'd imagine they have sophicated systems to maintain their overround typically 17-15% highstreet and 8-10% online. They'll fluctuate the price through the course of the day if necessary to try and stay below the exchanges and maintain margin as best they can, it's not an exact science as you can't predict how much will be staked and when.

They only back on BF to remove spikes of liability. The threshold beyond which they begin to pass on risk is calculated as a percentage of the anticipated total stake for the race. So, they might anticipate taking £1m on a particular race and therefore the head trader might decide he will only accept £1m of liability on one particular horse winning. It's often much more than this sometimes 200-300%. Basic stuff I appreciate. The art of the trading floor is to spot where too much liability is accumulating and pass it on quickly.

In the normal run of things the amounts the high street are off setting on the exchanges will have little or no impact. However, during major events like Cheltenham the major bookies probably have a massive impact, particular when you see favourites coming in all day. Laddies, Hills, Coral and the like have a nightmare scenario with the favourites. Kauto on current form will have all the CEOs praying at the altar this year and the trading floors running around like headless chickens... trust me. Listed companies much prefer to have a smooth consistent growing profit, dips in revenue due to "an unfortunate sequence of results" never reflects well on the management team in my experience they just get critised for not handling their risk better - usually by a sector specialist from an investment bank... but lets not go there.

I think the price is pushed around by many factors but during the big events the surplus liability from the big bookies enivitably spills over into the exchanges for sure and on those days they control the price I'm sure. During an average day like today Betfair will be dictating the price and everyone else following, and I suspect this is mostly traders with a smattering of inside knowledge.

Hope my inane rambling help, I'm sure you know most of it already.

[Ferru123]

Thanks Undercover - It's very interesting to know what goes on 'behind the curtain'!

Let's say a bookmaker lowers their price on a favourite. It seems to me that there could be two reasons for this. Either:

A. They want to reduce their exposure on a particular horse.

OR

B. They are using reverse psychology, and think that, by lowering the price, punters will assume that the horse is fancied by people in the know, and the volume of bets placed will increase as a result.

Which would you say is more likely?

Jeff

[Mr Undercover]

Hi Ferru,

Interesting question. Most trading floor managers will be handed a mandate from the FD to maintain an overround of 17% or whatever and so will try to get the balance between being commpetitive with their percieved competitors always getting marketing to boast about "best price" or whatever nonsense they've come up with to ensure price sensitive punters are garanteed a match with competitors best odds (notice this always excludes the exchanges) while at the same time endeavouring to edge in on the favourite. Generally it means the highstreet punter gets a worse deal.

I'm not aware that they'll intentionally dip a price to try and generate a movement, the market is just too efficient and punters will switch from Laddies to Hills to Coral to get better value at the drop of a hat. The average online guy has 5x accounts. Also, these big corporate companies are like machines they are just not interested in playing games to manipulate the market.

They will dip the price at big meetings if there is a rush of money for a favourite and the liability is building towards threshold i.e. better to get as much money as possible on your own book even if you're being uncompetitive before passing the excess to someone elses book usually BF. If you see a horse coming in strong it means everybody has got it wrong and the industry is scrambling to get rid of their liability this is something they try to avoid. If they see the early signs of huge liability generating for one particular horse, like Kauto, they'll start taking a position on BF early doors to avoid an unprofitable rush.

It's a very tricky business balancing a book I'm sure you appreciate.

So after that great long ramble I'd say Option A to reduce exposure.

[hgodden]

Interesting stuff Mrundercover

[psycho040253]

Is anyone aware that what looks to be the Bomber is also operating on Betdaq?

Psycho