Monday, March 28, 2011
Future of Meadowlands Racetrack Somewhat Related to NJ Exchange Wagering
This article isn't directly related to exchange wagering, but it does have several indirect impacts. Firstly, part of the value of the Meadowlands to Gural appears to be derived from the future introduction of exchange wagering in New Jersey. However, the impact isn't a one way street, as part of the value of exchange wagering in NJ to whoever ends up operating it will be derived from a longer racing calendar, which is likely dependent on the continued operation of the Meadowlands as a racetrack (whether thoroughbred or harness). Let's hope Gural and the unions can work things out!
Sunday, March 27, 2011
Inefficient Markets and the Profit Opportunity US Exchange Wagering Will Provide
The first year or two after exchange wagering becomes available in the United States should provide some incredible profit opportunities. However, the bulk of those won't last forever, and they'll begin to dry up right around the time that most people are becoming aware of them.
The reason for that has to do with the natural progression that any new market tends to go through. Initially, there are relatively few participants and most of them don't have the knowledge or experience to wager or invest wisely. New (or immature) markets are inefficient. If you know what you're doing, you can make a killing against the weak competition. Over time, a number of things tend to happen that gradually make the markets more efficient and the competition tougher. Those who started without experience, gain experience and become more skillful 'opponents'. Those who were skillful from the start gradually accumulate more of the money and their player comes to make up a larger proportional of the overall market. And as the overall market grows, the amount of money at stake grows more and more of the smartest potential competitors. By the time the whole world knows about the market, competition is so tough that you need to be one of the best to be profitable.
This pattern takes place in one market after another, including a lot that people don't think of as 'markets'. In 'Market Wizards' by Jack Schwager, a number of the interviewed options traders describe this phenomenon. They all seem to agree that anybody with a calculator and the knowledge of basic options pricing formulas was able to make money when options first began trading. That easy opportunity was gone by the late 1980s. One of my other interests is fantasy sports, and the same situation exists there...each new contest format starts out easy to win for the first year or two, and then the competition becomes tougher and tougher.
The main difference from one market to another is how quickly they become more efficient. The more money at stake and the less barriers to efficiency there are, the faster it happens. In a future post, I'll talk a bit about what those 'barriers to efficiency' are.
The reason for that has to do with the natural progression that any new market tends to go through. Initially, there are relatively few participants and most of them don't have the knowledge or experience to wager or invest wisely. New (or immature) markets are inefficient. If you know what you're doing, you can make a killing against the weak competition. Over time, a number of things tend to happen that gradually make the markets more efficient and the competition tougher. Those who started without experience, gain experience and become more skillful 'opponents'. Those who were skillful from the start gradually accumulate more of the money and their player comes to make up a larger proportional of the overall market. And as the overall market grows, the amount of money at stake grows more and more of the smartest potential competitors. By the time the whole world knows about the market, competition is so tough that you need to be one of the best to be profitable.
This pattern takes place in one market after another, including a lot that people don't think of as 'markets'. In 'Market Wizards' by Jack Schwager, a number of the interviewed options traders describe this phenomenon. They all seem to agree that anybody with a calculator and the knowledge of basic options pricing formulas was able to make money when options first began trading. That easy opportunity was gone by the late 1980s. One of my other interests is fantasy sports, and the same situation exists there...each new contest format starts out easy to win for the first year or two, and then the competition becomes tougher and tougher.
The main difference from one market to another is how quickly they become more efficient. The more money at stake and the less barriers to efficiency there are, the faster it happens. In a future post, I'll talk a bit about what those 'barriers to efficiency' are.
Saturday, March 26, 2011
Eight Groups Bid to Operate Thoroughbred Racing at Monmouth Park
Catching up on some other relevant news...several weeks ago eight groups submitted initial applications to bid on operating thoroughbred racing at Monmouth Park. As previously mentioned, Betfair was one of the bidders: http://www.northjersey.com/news/031011_Eight_potential_bidders_for_Monmouth_Park_submit_deposits.html.
Wall Street Firms, International Securities Exchange and Cantor Fitzgerald Want In on NJ Exchange Wagering
This article a from last December, but still interesting enough to be worthwhile reading for anyone interested in the future of exchange wagering here in the U.S.: http://webreprints.djreprints.com/2582111488832.html. Wall Street firms, particularly International Securities Exchange and Cantor Fitzgerald are interested in using their technology to operate exchange wagering for the horse racing industry in New Jersey (and ultimately the rest of the U.S., I'm sure).
Thoroughbred Times: Betfair Positioning Itself For New Jersey Exchange Wagering
Here's an article from a couple of weeks ago about how Betfair is beginning to position itself in an attempt to operate exchange wagering in New Jersey (and to a lesser extent California): http://www.thoroughbredtimes.com/national-news/2011/03/09/betfair-us-exchange-wagering.aspx.
In addition to the items that the article discusses, it's pretty obvious that the reason that Betfair was one of the applicants who expressed an interest in operating Monmouth Park was part of this strategy as well. That would serve a two-fold purpose:
1. A strong Monmouth Park is critical to the success of exchange wagering in New Jersey.
2. A local presence in New Jersey would give Betfair a leg up in the jockeying for position to become an exchange wagering operator for NJ. It's highly likely that politicians will favor "local businesses" when awarding rights to operate this lucrative business.
In addition to the items that the article discusses, it's pretty obvious that the reason that Betfair was one of the applicants who expressed an interest in operating Monmouth Park was part of this strategy as well. That would serve a two-fold purpose:
1. A strong Monmouth Park is critical to the success of exchange wagering in New Jersey.
2. A local presence in New Jersey would give Betfair a leg up in the jockeying for position to become an exchange wagering operator for NJ. It's highly likely that politicians will favor "local businesses" when awarding rights to operate this lucrative business.
Bloodhorse Update on Exchange Wagering in U.S.
I'm going to try to start giving frequent updates on the state of exchange wagering in the U.S. Here's a recent article from Bloodhorse to get that started: http://www.bloodhorse.com/horse-racing/articles/62115/rci-exchange-wagering-takes-center-stage.
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