Modified Exchange Spread Calculator

I've made a slight addition to the exchange spread calculator.  It now includes two different measures of the size of the spread.  What used to be displayed as the spread is the difference between the odds implied by the best 'Bet For' available and the best 'Best Against' available, which is now labeled as 'Spread Diff' and there's also a column for 'Spread Pct' (expressed as the difference in implied chance of winning over the chance of the best available 'Bet For' offered (which will always have a higher implied chance of winning than available 'Bet Against' odds.

For example, if a horse has a Bet For of 4 available (25%) and a Bet Against of 5 available (20%), the spread diff would be 5% and the spread pct would be 20% (5%/25%).  Here's an example what the calculator display looks like now.  As before, sign up for my email list and send me an email at zelvin30@hotmail.com if you want a copy of the calculator.  Also, let me know if you'd be interested if I create a 'live' version that updates in real-time.

Some comments on exchange wagering spreads

This'll be a quick post just to clarify my previous comments on the wide spreads on Betfair.  Those comments weren't meant as a criticism.  I think the wide spreads are something to be aware of and navigating them requires some caution, but they're also to be expected so soon after launch.  In fact, the spread calculator I wrote about in previous posts is meant as a tool to help time the placement of your orders.  When you see an especially wide spread on a horse, hold off on matching an existing order.  In general, while spreads are wide, place offers rather than matching them.  If anything, the wide spreads simply provide a bigger edge to smart bettors.  That's not necessarily great news for Betfair, but it's definitely good news for you...as long as you make sure that you're one of those smart bettors!

An Update From Betfair

Betfair has finally provided an update on how things are going with exchange wagering so far: http://www.drf.com/news/betfair-encouraged-initial-response-exchange-wagering-new-jersey

It's a bit tough to tell how much of the volume on the exchange is new volume.  The key metric is that about one third of volume is coming from users who were not previously using 4NJBETS.  But what exactly does that mean?  It sounds as though it could mean that one third of volume is split among completely new bettors in NJ and bettors in the UK who may have already been betting on the exchange, while the other two thirds are bettors in NJ who were already on 4NJBETS.  Or maybe the article got some nuance of the quote just slightly wrong and it was meant to convey something completely different.  It's hard to tell, and there certainly isn't enough data yet to know how the financial impact of the exchange is shaking out so far.

All we really know is that liquidity is pretty good (better than I expected at this point), that user feedback is positive and that the technology appears to be working well

Exchange Spread Calculator

I've created an 'Exchange Spread Calculator' that uses the 'Bet For' and 'Bet Against' bids to come up with a few useful metrics:
Implied chance of winning for each horse based on 'Bet For' and based on 'Bet Against'
Total implied chance of winning for all horses in race based on 'Bet For' and based on 'Bet Against'
Spread in implied chance of winning for each horse
Total spread for all horses in race

Here's an example of the output with less than a minute until post time for the 2nd race at Presque Isle Downs on Thursday:

Right now, the calculator requires you to manually enter the best Bet For offer and best Bet Against offer for each horse, but I'd like to create a version of this that uses the Betfair API to automatically update the information live.

If you're interested in getting a copy of the spreadsheet containing the 'Calculator', just join my email list (on the right side of the screen) and then send me an email at zelvin30@hotmail.com letting me know that you'd like a copy.

How wide are spreads on Betfair NJX?

How wide are spreads on Betfair's New Jersey Exchange (NJX)?  Despite the surprisingly strong volume, spreads appear to be REALLY wide so far.

Here's the last screenshot I took from yesterday's 2nd race at Presque Isle Downs...

And just in case you think that race was an exception, here's yesterday's 5th race at Louisiana Downs...

Those two screenshots are both in the final minute before post time, when liquidity is at (by far) it's best.  Spreads were much wider a few minutes earlier in each case.

These wide spreads suggest two things:

1. If you're matching other people's bets, you're very likely getting screwed by the spread.  You're generally going to be much better off placing an offer and letting someone else match it.
2. Either the people who are 'Betting For' or those 'Betting Against' (or both) are getting a particularly bad deal if they match existing bets.  Sometime in my next few posts, I'll make an attempt to calculate this.

How much volume is Betfair getting in the US?

I don't think any data on this has been published and there's no easy way to look it up yet.  The data is available for a short time after betting on each race completes though.  I tracked the betting on two races last night around 6pm Eastern (and looked at final data for several other races right before these).  I found a number of interesting things, which I'll share over the next few blog posts.

The first thing was that volume is generally a lot higher than I expected.  The lack of discussion of exchange wagering since it launched has given the impression that it's not going well.  The results I looked at definitely caused me to rethink that. The 5th race at Louisiana Downs yesterday had $39,878 of matched bets, while the 2nd race at Presque Isle Downs had $72,597.  The other two races I looked at were in the same range.  That's about ten times what I was expecting to see, although it also includes bettors in the UK (who I believe have been able to bet at these tracks for years).

The other big surprise to me was that basically all of the betting happens at the last minute.  I assumed that with fixed odds, bettors would be more willing to place bets in advance.  That couldn't be further from the truth.  For example, the Louisiana Downs race was showing only $428 matched with 10 minutes to post time and $5,835 with 1 minute to post time.  Almost 99% of the matched volume happened in the last 10 minutes and more than 80% in the last two minutes.  I think that tells us a bit about how people are betting and what strategies are likely to work well.  I'll talk about that in future posts.

Clearing up some confusion about exchange wagering spreads

Like anything new, there's going to be some confusion about how exchange wagering works.  I saw a good example of this in the comments on an article about exchange wagering a few days ago.  One of the commenters was claimed that the difference between the prices offered for 'bet for' and 'bet against' on the exchange is evidence that rather than matching bettors against each other, Betfair is booking the bets themselves.

This conclusion could not be more wrong.  In fact, it's a logical impossibility for the bid and ask price in any market to be the same.  Think about it for a minute.  If I'm willing to bet on a horse at 5-1 odds and you're willing to bet against the same horse at 5-1 odds...then the exchange will book our bets against each other, and neither of our offers will still be listed on the exchange.  The 'bet for' bids represent the best offers to bet on a horse that have not yet found a match.  And the 'bet against' bids represent the best offers to bet against a horse that have not yet found a match.  If the numbers were the same, then they'd be matched and removed from Betfair's display.

How are coupled runners handled in exchange wagering?

The short answer is: they're not.  Betfair does not offer exchange wagering on races that include coupled runners.  The problem is that liquidity is pooled between the U.S. and the U.K. and the two countries have differences in regulations regarding handling of coupled entries.  So there's apparently no way for the exchange to operate in a way that satisfies the regulations of both countries with regard to coupled entries.

Can I make exacta and other exotic bets in exchange wagering?

Betfair doesn't currently allow exotic betting on their betting exchange.  The main reason for this is there are simply too many different permutations of exactas, trifectas, doubles and other exotics.  If these were all offered, the exchange liquidity (which is already pretty low until more users start to bet on the exchange) would be split up to such an extent that it would be difficult to match bets.

Converting Decimal Odds to Fractional Odds

To avoid issues with rounding and ambiguity, exchange wagering uses decimal odds.  To convert from decimal odds to fractional odds (which will be more familiar to anyone used to betting on horse racing in the U.S.), you basically subtract one and then convert to a ratio.  Here's a chart for some selected odds:

Betting For and Betting Against

Exchange wagering allows you to either Bet For or Bet Against a horse.  The image below is from the example used in the recent DRF/Betfair webinar.



This shows the available bets for the 6th race at Woodbine on Friday, May 13th.  One thing that confused me about this at first was that I thought this was showing orders that someone else had place, and I couldn't figure out why all the 'Bet For' offers were at lower odds than all the 'Bet Against' offers.  The right way to think of it is that these are the bets that YOU can make.  That means that someone else has placed an order to make the opposite bet.  For example, someone is willing to place a $5 bet FOR Wilma at 50-1 and you can place a $5 bet AGAINST her at 50-1.

What tracks offer exchange wagering?

For Betfair to offer exchange wagering at a track they need to make arrangements with the operator of the track.  The list below are tracks that Betfair is offering as of May 21, 2016.  This list is likely to change fairly often.  Also note that In Play wagering is only available at some of these tracks.

Keeneland
Monmouth Park

Woodbine

Will Rogers Downs

Louisiana Downs

Emerald Downs

Evangeline Downs

Charles Town Races & Slots

Mountaineer Casino Racetrack & Resort

Meadowlands
Delta Downs
Hawthorne
Presque Isle Downs
Sam Houston
Turf Paradise
Turfway

How Much Takeout Is There On NJ Exchange Wagering?

This is another of the big advantages of exchange wagering compared to other forms of betting.  Betfair is currently charging a flat 12%.  This compares very favorably with the 17% and up charged on other bets in the United States, and could make the difference in whether a skilled bettor is profitable or not in the long run.

Unlike UK exchange wagering, there are no additional fees or taxes on players who win over time.

It's also worth noting that the 12% is charged only the net position of winning bets.  So if you lose a bet, you pay nothing.  And if you win a $200 bet FOR a horse and lose a $100 bet AGAINST the same horse, you'll only charged the 12% fee as if you had only made a $100 bet.

What Is In-Play Betting?

In-play betting is one of the many great features of exchange wagering.  It allows you to make bets for (or against) a horse while the race is being run.  Other bettors will continue to make offers on either side of the market as the outcome of the race becomes clearer, allowing a wide variety of betting strategies to be pursued.  As soon as the horses cross the finish line, in-play betting comes to an end.  Betfair does not allow betting on the outcome of a photo finish or inquiry.  According to Betfair, up to 25% of volume on their UK exchange comes from in-play betting.  However, it's not clear whether that's specifically for horse racing or for all sports.  Presumably longer duration sports would get a larger percentage of their wagers in-play, but with all the automated tools available for Betfair's exchange, that may not be as true as one would think.

Introduction to Exchange Wagering

If you're looking for an introduction to exchange wagering, you should probably check out the Introduction to Exchange Wagering webinar that Betfair and Daily Racing Form collaborated on last week.

The presenters in the video were Bart Barden, Exchange Director for Betfair U.S. and two members of the Daily Racing Form team.

The video lasts just over an hour and covers:
What is exchange wagering?
Logistics for NJ residents (Creating account and logging in)
Using the exchange to place actual wagers (using one race as an example)
Question and Answer session

I haven't watched the full video yet, but will provide some additional information from it once I do.  With the lack of information available on exchange wagering in the U.S. at this point, I can't imagine that there's going to be anything much more information than the video.

Update on New Jersey Exchange Wagering

Sorry for the misleading title...but the only update I can provide on New Jersey exchange wagering at this point is that there is no update.  There's been a surprising lack of coverage in the media and presumably Betfair is comfortable simply making sure that things are working fine and getting feedback on the experience from those who are placing bets on the exchange.

One item worth noting is that while low volume or lack of liquidity would normally be a problem for a new exchange site with few local users aware of its availability, that's not the case for Betfair because they are able to pool liquidity between New Jersey and users in the UK.

Exchange Wagering Uses Fixed Odds

One of the many great things about exchange wagering is that it uses fixed odds.  That's a huge advantage.  Think about the existing parimutuel system in the U.S. for a second.  How many other types of bets require you to make a bet without knowing what odds you're getting on that bet?  Not only do need to forecast what will happen in each race, but you need to forecast what the odds will be.  With exchange wagering, that's not true anymore.  When you place a bet, you know exactly what the odds on that bet will be.  If you think that a horse has a better (or worse) chance of winning than the odds would suggest...then you know that you've made a bet with positive expectation.

What US tracks can I bet on with Betfair's exchange

Right now, the tracks you can place wagers on are somewhat limited.  Monmouth Park is the biggest one, but there are number of smaller options available on days (and at times) when Monmouth isn't available.  Right now (Tuesday morning) the two options are Mountaineer and Will Rogers Downs.  I didn't even know that there was a Will Rogers Downs.  Quarterhorses maybe?

Can I do exchange wagering in my state?

If you are based anywhere in the United States except for New Jersey, then the answer is 'no'.  If you're in New Jersey, then you can do exchange wagering.  You do not need to be at the track to register, deposit, bet or withdraw money from Betfair.

Who is running exchange wagering in New Jersey

Exchange wagering in New Jersey is run by Betfair (the dominant exchange wagering site in the UK) and is being done in partnership with the group that owns Monmouth Park.  To participate in US exchange wagering, visit the site at exchange.us.betfair.com.

New Jersey Exchange Wagering Is Live

Looks like I may have been just a bit early on exchange wagering coming to the United States!  After almost a five year hiatus from this website, I'm going to begin publishing news, tips, data and tools for exchange wagering.  As of this past Monday, bettors in New Jersey can do exchange wagering on a variety of tracks!