Flash Boys

[Jay Trotter]

I'm reading an amazing book called Flash Boys by Michael Lewis, author of Moneyball, The Big Short, The Blind Side, etc.. The book sheds light on how Wall Street insiders are systematically ripping off their customers.

In a nutshell, these guys known as "high frequency traders" are using the speed of their computer systems (in milliseconds) to peak at people's trades, intercept those trades, and then manipulate things to skim profit from the transactions.

http://si.wsj.net/public/resources/images/ED-AS020_bkrvfl_DV_20140330162215.jpg
The reason I'm posting this, is that it got me to thinking about the many comments made in the forum about the "Whales" and the late "odds changes", etc. If this is being done on Wall Street through the biggest banks in the world, would it not be possible for something similar to be happening in the racing world? I would definitely think so.

I highly recommend this read for all handicappers as it will open your eyes to some of the issues we might be dealing with in the game.

Here's a LINK (http://www.amazon.com/Flash-Boys-Wall-Street-Revolt/dp/0393244660) to the book and a better description.

[davew]

Some people feel that some whales have probability lines down so well, that they 'normalize' the pools so no one can beat the track take. The only way to end with a positive is with large rebates, like these whales are getting.

I disagree with that and feel some overlays are still available.

[acorn54]

i heard on a vegas radio sports show, an interview with a mr. matties, who is a professional gambler. he said in the past 5-10 years wall streeters have entered the parimutuel sytem in horseracing, and that it is alot harder for him to profit from u.s. horsebetting. he said he is venturing into the hong kong racing parimutel system.


http://www.eog.com/eog-radio/


the above is a link someone else posted on this board if you are interested in hearing it
if the original poster is offended i re-posted it, i will try to delete it or pace advantage can delete it.

[lamboguy]

Some people feel that some whales have probability lines down so well, that they 'normalize' the pools so no one can beat the track take. The only way to end with a positive is with large rebates, like these whales are getting.

I disagree with that and feel some overlays are still available.the overlays are few and far between these days. and often times when you do get them, they take place on poor handle tracks or poor handle days at bigger tracks.

[DJofSD]

I'm most of the way through the book. It is a good read and now I wonder if I should read some of the authors other works.

As far as the idea of the whales doing similar things as the HFT, I understand where you are coming from but I'm not sure if it applies.

Part of the front running scheme used by the HFT's is to probe the market with small trades, to sample what's viable as an offer, then, to establish a position on another exchange vis-a-vie the advantage of their computers being co-located.

If whales were able to do similar things, how does that translate into an advantage? The trade happens only once and all at once -- when the betting period has closed then the results of the race are official. The transaction is executed when the payouts are made to the holders of winning tickets.

What am I missing?

[Jay Trotter]

As far as the idea of the whales doing similar things as the HFT, I understand where you are coming from but I'm not sure if it applies. I guess what I'm referring to is that these guys operate in "milliseconds" (ie. It takes 100 milliseconds for a blink of the eye). These guys can operate in a 4 millisecond gap; and they obviously take advantage through the use of computer systems. So, if they are able to get bets down very, very late to exploit a fast break or an underlay situation far beyond the capabilities of the average better then I would equate that exploitation to what the HFT's were/are doing on Wall Street.

Put it this way, if Wall Street can be exploited, surely the TOTE systems of a very dysfunctional and antiquated North American racing industry can be exploited.

Probably, two things drive the development of technological advancement more than anything.....number one - porn websites; number two - making money in financial markets. It isn't a leap to imagine what these HFT types are doing in the parimutuel pools.

[Overlay]

They've had multiple stories about this on TV recently. (The one I saw was on 60 Minutes.)

[Larry Allen Lyle]

The 60 Minutes article said that the Wall Street computer invasion has been
nullified by a strategy of dispersing orders into smaller amounts so that the big orders are not apparent.

[traynor]

The 60 Minutes article said that the Wall Street computer invasion has been
nullified by a strategy of dispersing orders into smaller amounts so that the big orders are not apparent.

As in "computer-assisted wagering." With the option (if one wagers enough) to cancel bets before the final update.

[Magister Ludi]

Building a parimutuel tote model with an error of <1% is ridiculously quick and simple to implement compared to building FPGA ULL UHFT infrastructure.

[Seabiscuit@AR]

Regulators everywhere are happy to sign off on rebates to the highest bidders. There is a very high probability that some regulators will also allow things like super fast tote feeds, betting after the cut off time and access to "blind" tote pools to the highest bidders

[PaceAdvantage]

Regulators everywhere are happy to sign off on rebates to the highest bidders. There is a very high probability that some regulators will also allow things like super fast tote feeds, betting after the cut off time and access to "blind" tote pools to the highest biddersI think some might even refund losing tickets as long as it's not past the 48 hour cutoff point.

[Seabiscuit@AR]

Well the Australian operation NSW TAB got caught redhanded allowing a big player to place big bets after the cutoff time in 2001 (they cancelled some big bets and amended them with new big bets once the pools were closed for everyone else). NSW TAB was a big operation not a small time operator (now part of Tabcorp an even bigger operation). They got caught because of the dislocation between bets closing time and race time

See the story at 7:48 NSW Dubai Gate at the link below

http://www.abc.net.au/radionational/programs/breakfast/monday-23-april-2001/3474906

NSW TAB admitted guilt and were fined for this incident

But if they were prepared to do it, it tells me it is possible that other tote outfits would be prepared to do the same for big turnover. Using today's technology it would be possible to allow a big player to place bets just after the jump on everyday races so that the big player knows the odds they are taking

All you need is for a tote to be willing to engage in this kind of activity and a big player looking for an advantage. Happened in NSW back in 2001, why not elsewhere?

[Stillriledup]

I'm most of the way through the book. It is a good read and now I wonder if I should read some of the authors other works.

As far as the idea of the whales doing similar things as the HFT, I understand where you are coming from but I'm not sure if it applies.

Part of the front running scheme used by the HFT's is to probe the market with small trades, to sample what's viable as an offer, then, to establish a position on another exchange vis-a-vie the advantage of their computers being co-located.

If whales were able to do similar things, how does that translate into an advantage? The trade happens only once and all at once -- when the betting period has closed then the results of the race are official. The transaction is executed when the payouts are made to the holders of winning tickets.

What am I missing?

I don't think you're missing anything, i don't think this is similar to computers betting in horse racing and the reason is that the stock market is a "fixed price" that you get when you make a purchase, where as horseracing, the price isnt known until the actual betting is closed. As long as they are betting before the close of betting, even if its 1 millisecond to post, i don't have a problem with it.

[glengarry]

If there was no past posting going on, can someone please explain why the handle at certain tracks dropped off when the windows closed upon loading of the first horse? I am going by my memory and some others who are certain this happened. Tracks ended this "experiment", and the handle went back up. If the batch bettors are looking for pool inefficiencies, then why would they bet less if the pools locked 40 seconds before the gate opened instead of when the gate opened?

Since racetrack revenue is directly correlated to pool size, there is no incentive to really look into the matter. It is the opposite, as whatever increases handle, even if somewhat suspect, is actually beneficial to the bottom line.

[Jay Trotter]

I don't think you're missing anything, i don't think this is similar to computers betting in horse racing and the reason is that the stock market is a "fixed price" that you get when you make a purchase, where as horseracing, the price isnt known until the actual betting is closed. As long as they are betting before the close of betting, even if its 1 millisecond to post, i don't have a problem with it.I think you're missing the whole point of what I originally posted. The stock market is not a fixed price with these guys. They intercept the trades before they actually go through (milliseconds) and interpret the investors intentions (ie. size of order, price, etc.) and then manipulate the price by pennies/portions of pennies. By doing this they are basically taxing every trade in the market and making numerous billions of dollars annually.

I just finished the book and highly recommend it. It is very well written and facinating and infuriating that the "trusted" large banks are systematically assisting the HFT's in ripping off investors, both individual and corporate.

[DJofSD]

I just finished the book and highly recommend it. It is very well written and facinating and infuriating that the "trusted" large banks are systematically assisting the HFT's in ripping off investors, both individual and corporate.
And, all made possible by the SEC.

[whodoyoulike]

And, all made possible by the SEC.

The SEC probably didn't understand the effect. I think most government agencies (exception may be the FBI and a few others) are reactionary versus proactive. That's why it frequently appears they have their head(s) up their ....


A memorable 300 post!!!

[Dark Horse]

I'm reading an amazing book called Flash Boys by Michael Lewis, author of Moneyball, The Big Short, The Blind Side, etc.. The book sheds light on how Wall Street insiders are systematically ripping off their customers.

In a nutshell, these guys known as "high frequency traders" are using the speed of their computer systems (in milliseconds) to peak at people's trades, intercept those trades, and then manipulate things to skim profit from the transactions.

http://si.wsj.net/public/resources/images/ED-AS020_bkrvfl_DV_20140330162215.jpg
The reason I'm posting this, is that it got me to thinking about the many comments made in the forum about the "Whales" and the late "odds changes", etc. If this is being done on Wall Street through the biggest banks in the world, would it not be possible for something similar to be happening in the racing world? I would definitely think so.

I highly recommend this read for all handicappers as it will open your eyes to some of the issues we might be dealing with in the game.

Here's a LINK (http://www.amazon.com/Flash-Boys-Wall-Street-Revolt/dp/0393244660) to the book and a better description.



I was aware that this is going on. The market is more rigged now than before the 2008 crash. It's why there is no relationship between the economy and the stock market getting to new heights. Read the 'history of the money changers' online if you want more background into a financial system that is set up to rip everybody off except the banksters and their cronies.

Horse racing. How about cancelling big wagers just after the race goes off?

[highnote]

I'm most of the way through the book. It is a good read and now I wonder if I should read some of the authors other works.


I have read all his books except this one and recommend them often. I'll read this one eventually.