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The Sporting Exchange – BetFair – Annual Review 2008 – PDF file
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BetFair is doing fine -thanks for asking.
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Tag Archives: BetFair
The New York Times on InTrades US political election prediction markets
The NYT writers discusses 2 (different?) issues.
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#1. There was market arbitrage opportunies in the recent past between InTrade and BetFair —-unlike 4 years ago, and contrary to the laws of economics.
– The price of the Barack Obama event derivative was cheaper on InTrade than on BetFair and the Iowa Electronic Markets. Conversely, the price of the John McCain event derivative was more expensive on InTrade than on BetFair and the Iowa Electronic Markets.
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#2. The NYT writer reports (without linking to it) the findings of the InTrade investigation about the behavior of their unnamed “-institutional investor”-.
– InTrade CEO John Delaney suggests that that institutional investor:
- might operate on InTrade at specific times where it might not be able to find liquidity on BetFair and/or IEM-
- might be a bookmaker willing to hedge its risks on a prediction exchange (a.k.a. betting exchange).
– Justin Wolfers’- PHD student remarks that that institutional investor is not making an effort to shop around for the best prices, within each InTrade political prediction market.
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RELATED: See the comments on Midas Oracle here, here, here, and here.
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Towards prediction market webpages (a la HubDub) that Google can index, that web visitors can land on directly (even after the event derivative contract expiry), that traders can comment on, and that bloggers can directly link to
Is BetFair far less usable than InTrade-TradeSports?
TradeFair was first branded as a serious financial prediction exchange, but it didnt work out, and TradeFair is now actually an operator that applies gambling (not betting) to the financial markets.
Take a look at their ad:
Three remarks:
- They got carried away from the prediction market approach (which, unlike InTrade, they never understood fully, anyway).
- This gambling approach of the marketing of the prediction markets is very interesting in terms of potential revenue growth. I encourage InTrade, TradeSports, BetFair, NewsFutures and HubDub to adopt it.
- However, it remains to be seen whether TradeFair is the right venue for gambling. TradeFair was supposed to be a serious financial prediction exchange (the British equivalent of HedgeStreet), and it is now the online equivalent of Macao or Las Vegas. Hummm…- Will these 2 different worlds mix well together? Could La Callas sell pork sausages? Could Yehudi Menuhin sell used condoms?
- And I won’-t mention the issue of problem gambling, which I predict will be made worse thanks to TradeFair Hi &- Lo and BetFair Arcades.
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Once the previous bet is resolved, you can start off anew with another 5-minute bet on the FTSE —-from the level that was the basis for the settlement of the previous bet.
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BetFair Predicts = a new WordPress-powered website concocted out of San Francisco, California… -whose informational value is close to zero.
BetFair Predicts
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UPDATE: The guy in charge says in the comment area that this is just an early beta website, which is going to be much improved soon.
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WHAT I LIKE IN BETFAIR PREDICTS
- BetFair Predicts is a (clumsy) response to some of the (harsh) criticism I directed at them. So, it shows that they listen up.
- They chose WordPress as the content management system (CMS) for this project —-it’s the right choice. (DruPal would have been OK for a more sophisticated project.)
- They are web-hosted on an independent domain name (as opposed to a sub domain on the betfair.com website.) It’s good because it gives them freedom to use whatever information technology they want. (For security reason, they get limitations on their main website. That’s why the BetFair blog had to be run on MovableType, and not on WordPress.) – [UPDATE: The website now redirects to http://predicts.betfair.com/.]
- The architecture of this new website is well done. It’s standard. (Unlike the BetFair blog, which is a price of crap, technically.)
- They created a new compound chart on the 2008 US presidential elections. (I have hot-linked to it, just below.)
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WHAT I DISLIKE IN BETFAIR PREDICTS
- It was an error to call this project BetFair Predicts“, singular. “BetFair Predict”, plural, would have been better, because the wisdom of crowds requires both a collective judgment mechanism (here, a predition exchange named BetFair) and the event derivative traders associated with that prediction exchange. By using the singular, BetFair appropriates a predictive power that should be credited to a community (lead by BetFair).
- Overall, it’s a very thin website. It does not bring much to the kitchen table. (That new compound chart above is really the novelty at this time. But it’s not Earth shattering, since the BetFair Politics Zone already displays compound charts, which are dynamic, and which can be hot-linked to.)
- That compound chart is probably not a dynamic one (that is, a chart that will update itself in the future). This compound chart is just an image that has been uploaded from the BetFair exchange to this new BetFair Predicts blog, I doubt that that image will be updated in the future.
- And they seem light-years behind when it comes to embeddable chart widgets. (They claim on the frontpage that you can “embed” their charts in your blog, but what they offer is just static charts. Those idiots don’t know what they are talking about.)
- Their explainer on prediction markets is…- so-so.
- Their blog is written by a “Joe Seither”, whose background is not disclosed. The writings (well, only 2 posts, as of today) are typical of any copy-writer who would have been instructed about the mechanism of the prediction markets the day prior to undertaking this project. You won’t find any insights- just banalities. What I see is worthless.
- They can’t spell “RSS”. (See below.
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TAKEAWAY:
- BetFair is still struggling with the web publishing technologies.
- BetFair is still struggling with the prediction market approach, embodied by InTrade.
- BetFair has a hiring problem: they pick up incompetents on the job market and put them in charge too quickly. The result is the disaster detailed above, and chronicled in the Midas Oracle archives since 2006.
InTrade has surpassed BetFair and TradeSports (and the Iowa Electronic Markets, too).
InTrade’-s PageRank is now 7 / 10 —-while all the other major prediction market firms are at 6 / 10.
- It shows that the prediction market approach is paying off. Do provide journalist-friendly objective probabilistic predictions (expressed in percentages –-not those fucking decimal odds), and the media will link to you, thanks to all the free-market economists who love your model and act as unpaid publicists for you. Make sure your website can resist under heavy traffic loads on Election Day, and during the occasional days where important news break. Then, milk out all this free publicity. Run registration ads allover your exchange website to attract new traders. Make money. Invest in IT —-but don’-t let the IT maniacs complicate your prediction exchange too much (as BetFair did).
- Long-term, the InTrade model (based on the prediction market approach) should be more profitable, in theory. Because of legal impediment, InTrade is not as profitable as it should be, alas.
All against the BetFair premium charges
Excellent analysis from the “-Punt”- blogger.
Serial bet winners are accused (that’-s the word) to withdraw money from the BetFair machine, compelling BetFair to attract new money from newbies at a high marketing cost, and thus BetFair has decided to tax those serial bet winners.
I wonder what a Harvard or Wharton MBA would think of this reasoning.
It is my understanding that, in the betting and gambling business, you are always trying to attract new blood to make up for the disillusioned gamblers that you are losing on a daily basis.
Am I correct, folks?
Why don’-t BetFair raise moderately the trading fees for everybody, or try to reduce the cost of the BetFair IT architecture by slashing out what has been unnecessary added by their IT maniacs?
Previously: BetFair impose new “Premium Charges”, and their very active traders are up in arms. – 2008-09-09
As Justin Wolfers noted, maybe there are today bigger practical obstacles to prediction market arbitrage.
– Legal restrictions for US traders on foreign prediction exchanges (BetFair, etc.)-
– Transaction fees (you would need to operate on 2 exchanges)-
– Currency risks and cost for hedging on that.
Eric Crampton (a Canadian exiled in New Zealand) says he has managed to turn a buck, though, by arbitraging between InTrade and iPredict New Zealand. He also makes 2 theoretical points. Go read it.
Is InTrade being manipulated? Why does InTrade give a discounted probability for Barack Obama as US president?
A quick link panorama.
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#1. Is InTrade being manipulated?
– Nate Silver shows that there are abrupt downward pressures on the Barack Obama event derivative, while we also see some abrupt upward pressures on the Hillary Clinton event derivative.
However, you can see by yourself that InTrade is resilient enough and does a great job of going back to normal [*], after just a few hours of trading:
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– At Portfolio, blogger Zubin Jelveh blows the incidents out of proportion.
– Professor Lance Fortnow has a more careful analysis and notes that the price of the Barack Obama bounces back quickly enough.
– Quick thought: Maybe the media should use an average of event derivate prices for the last 5 work days…- so that the abrupt perturbations would be eliminated.
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[*] UPDATE:
Professor Eric Zitzewitz:
I’m not sure you can conclude from Silver’s graphs that the market goes “back to normal.” You can conclude that it moves back in the opposite direction of the impact those large trades. Back when the Hillary for President market looked like it was being manipulated, it appeared that the manipulator was both placing a large purchase and then placing limit orders to provide price support and slow down the reversion of the price.
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UPDATE: Are we witnessing manipulation attempts on the “-Florida to vote Republican”- prediction market at InTrade?
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#2. Why does InTrade give a discounted probability for Barack Obama as US president?
– As you remember, Emile Servan-Schreiber of NewsFutures believes that it’-s a Republican conspiracy all over.
– Professor Justin Wolfers puts up an hypothesis: it’-s legally impossible for US traders to arbitrage on BetFair.
– InTrade put up a crappy excuse: the industry is still too “-young”-. How lame. How stupid. The industry was younger in the previous elections, where arbitrage opportunities didn’-t exist according to professors Justin Wolfers and Eric Zitzewitz (see their 2004 paper and their other publications).
– Blogger Zubin Jelveh swallows the InTrade P.R. line, and adds another crappy InTrade P.R. line: More arbitrage opportunities are being exposed in open air because much more observers are hunting down arbitrage opportunities in 2008 than in previous elections. That’-s a second blatant cretinery, uncorrected by the Portfolio blogger. Re-read Justin Wolfers’- blog post. Professor Justin Wolfers states that:
The current variation in price is larger than I have ever seen in my years of studying prediction markets. The forces of arbitrage that would typically eliminate these differences have been handicapped by the legal restrictions preventing U.S.-based traders from using overseas markets.
– Finally, professor Lance Fortnow says nothing about the arbitrage opportunities between InTrade and BetFair, but does offer some technical points about the issue of polls versus the prediction markets, centered around the question of state correlations. Read on.
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UPDATE: Eric Crampton (a Canadian exiled in New Zealand) says he has managed to turn a buck by arbitraging between InTrade and iPredict New Zealand. He also makes 2 theoretical points. Go read it.
UPDATE: Greg Mankiw just linked to Nate Silver.
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