High speed trading and horserace betting ?

[Benny]

Read the following quote today on high speed trading and made me wonder what the difference is with the direct to tote computer groups doing this sort of thing in racing ? Not a trader myself. Thoughts.

" The long-running debate about high-frequency trading intensified on Monday, after bestselling author Michael Lewis published a new book, "Flash Boys: A Wall Street Revolt." The book contends that high-speed traders have rigged the stock market, profiting from trades made at a speed unavailable to ordinary investors.

Proponents of high-speed trading have criticized the book, saying high-speed traders actually benefit other investors by providing liquidity to the market".

http://finance.yahoo.com/news/sec-ne...191943259.html

[dellinger63]

When they allow and payoff betting positions microseconds out of the gate it's a concern.

[philcski]

Originally Posted by Benny

Read the following quote today on high speed trading and made me wonder what the difference is with the direct to tote computer groups doing this sort of thing in racing ? Not a trader myself. Thoughts.

" The long-running debate about high-frequency trading intensified on Monday, after bestselling author Michael Lewis published a new book, "Flash Boys: A Wall Street Revolt." The book contends that high-speed traders have rigged the stock market, profiting from trades made at a speed unavailable to ordinary investors.

Proponents of high-speed trading have criticized the book, saying high-speed traders actually benefit other investors by providing liquidity to the market".

http://finance.yahoo.com/news/sec-ne...191943259.html

No. If it were a fixed odds market, then yes, but in the parimutuel world it doesn't matter when the bet is placed. Now, if they have access to the pools after everyone else, thus affecting the final price, then it would have an impact.

Essentially the high speed traders were front running (which means using information from customer orders to trade your own account ahead of them), which is technically illegal but the way they were (and still are) accomplishing it, it's almost impossible to prosecute, since you're talking about latency of microseconds.

[Benny]

Originally Posted by dellinger63

When they allow and payoff betting positions microseconds out of the gate it's a concern.

Pool manipulation by cancelling bets ? Late odds changes after the race has started due to computer programs getting in bets automatically to the tote seeing the last odds and exploiting ineffiencies ?

I'm not saying its exactly the same, but parallels the thinking and outcomes, thereby giving the computer teams an advantage over the rest of the investors in the pari mutuel betting pools ?

[Dunbar]

Originally Posted by philcski

No. If it were a fixed odds market, then yes, but in the parimutuel world it doesn't matter when the bet is placed. Now, if they have access to the pools after everyone else, thus affecting the final price, then it would have an impact.

Phil, your last sentence is important. When I bet, I would love to be the last person betting. I'd have a better estimate of what odds I'd be getting and how much my bets would affect the pool. For any two highly skilled players of equal capping ability, the one who bets later will have an edge.

--Dunbar