Bookmakers

There has been a huge growth of bookmakers due to the success of the Internet. They are made up of traditional high street bookmakers who have made use of the new technology to compliment their shop based business; Internet based bookmakers who trade exclusively on the web and peer to peer exchanges ("P2P"). A new development, which allows punters to trade amongst each other bypassing both the traditional bookmaker and web based bookmaker entirely. Each has its own methods and psyche, which has to be "handled" accordingly.

THE TRADITIONAL HIGH ST BOOKMAKER
These bookmakers came about in the 1960's due to a change in the gambling legislation. They vary in size from the "big three" namely Ladbrokes, William Hill and Coral who hold the largest market share, to the smaller independents such as Vickers.

These have the advantages (for us) of being:

1. U.K. based.
2. English speaking.
3. Deal in sterling.
4. Transactions are swift, easy to execute with minimal costs attached.
5. Well established.
6. Guaranteed liquidity.
7. Excellent lines of communication.
8. Good customer support.
9. Wide range of sports and trades available.

However, they are:

1. Adverse to risk with successful accounts quickly closed or "limited".
2. They are very efficient at spotting unusual trading patterns. Examples being unusual stake amounts, trading more than one outcome of an event and repeat trades.
3. Unwilling to accept "relatively" large trades.
4. Have differing rules governing the same individual sports.

In order to keep up a successful relationship with traditional bookmakers, great care is needed when trading with them. This has to be done with a great deal of precision and subtlety but if implemented properly can be very successful. There are a few basic rules to this:

1. Keep stakes to a "round" number.
2. Use multiple accounts for individual bookmakers.
3. Never trade the maximum allowed stake.
4. Vary the amounts traded for each account per counterparty.
5. Never repeat a trade with the same account.
6. Rotate accounts as much as possible.
7. When "price arbing", calculate stakes using the bookmaker price first and round the stakes either up or down.

INTERNET BASED BOOKMAKERS
It is the rise of these internet only bookmakers has led to the proliferation of arbitrage opportunities that we find ourselves able to take advantage of. A much wider range of odds are now available over the complete sporting calendar. The competition is fierce with their margins being cut as a result. These bookmakers have led to the market being truly global. These bookmakers provide both similar and different challenges to the more traditional bookmakers.

The main challenges connected with this form of bookmaker are:

1. Currency.
2. Liquidity.
3. History.
4. Communications / Language barriers.
5. Ability to place large trades.
6. Money laundering laws.
7. Retrieval of monies.
8. Transaction costs and methods.
9. Have differing rules governing the same individual sports.

Currencies most commonly used are Sterling, Dollar and Euro. When trading in a foreign currency, account has to be taken of the exchange rate, (if a trade is completed in Euros then that currency falls in value against Sterling before we can reclaim our return, our profit may well have been wiped out). Currency transactions always carry a cost so should be minimised where alternatives are available. As these counterparties are relatively new entities, many based in foreign countries, we have little information on their size and liquidity.

Caution should be taken with dealing with them until a good track record can be established. Language barriers can be a problem, along with e-mail only customer support, low stake and deposit limits and high transaction costs. The latter is due to deposit and withdrawal methods relying on either credit cards or third parties such as Neteller who all charge for their services. It can take a good deal of time as well as expense to retrieve returns from some of these counterparties which has to be taken account of before trading with them.

PEER TO PEER EXCHANGES
The introduction of the Peer to Peer exchange such as "Betfair" has revolutionised the gaming industry. People can now be both punter and bookmaker, bypassing the traditional bookmaker altogether. This ultra competitive environment tends to push the odds within it to a higher level than the bookmaker can manage because the bookmaker, amongst other things, has larger overheads so needs to protect his profit margin whereas the exchange player by in large just wants to have his trade matched so will offer a higher price to achieve this. The "average" punter who uses these exchanges is generally less familiar with "probability" than a bookmaker so will offer an odd that doesn’t represent the actual chance of the success or failure of any particular team / participant in an event. There are well over twenty such exchanges in the market. The largest of these being, Betfair and Betdaq.

The trading screen of an exchange is typically made up of two halves:

Oldenway	1.8 £577	1.81 £587	1.82 £17	1.83 £180	1.84 £62	1.86 £21
Millagros	3.2 £40	3.25 £1741	3.3 £138	3.35 £65	3.4 £200	3.45 £241
Leighton	8 £200	8.2 £30	8.4 £15	8.8 £16	9 £78	9.2 £7
Jamestown	29 £4	30 £3	32 £42	38 £6	40 £13	44 £2
Stepastray	90 £16	130 £16	150 £4	190 £5	200 £2	220 £11

The Odds which are 'available to back', to the left, have been placed by people who want to lay the outcome at those specific Odds. In other words, they are looking for other people to take the opposite side of their bet and to back the outcome. Likewise, the Odds which are 'available to lay', to the right, have been placed by people who want to back the outcome at those specific Odds. In other words, these customers are looking for other people to take the opposite side of their bet and lay the outcome.

This new trading environment has also provided both in conjunction with bookmakers and in isolation, a large amount of arbitrage opportunities which we can take advantage of.

The main differences between dealing with an exchange and a bookmaker are:

1. Exchange markets can be much more volatile leading to a need for faster execution of trades.
2. Volumes can vary wildly between different markets.
3. Exchanges charge commission on all winning trades. These can vary from 1% to 5% which must be included in all calculations.
4. There are no restrictions on the size of trade (other than the amount available in the market).
5. Repeat trades can be made.
6. Accounts are not limited or closed.
7. A competitor / team can be laid to loose as well as being backed to win.