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Confirmation of Bets: Combats price manipulation

Controllable: Balanced set price and variable price bets

Even More Control via Early Variable Prices

Reasonable Settings Cater for Extreme Conditions

Confirmation of Bets: Combats price manipulation

Confirmation of bets not only gives punters the opportunity to be satisfied with the bets that they place but it combats manipulation of the system by unscrupulous punters.

Controllable: Balanced set price and variable price bets

Imagine having a situation where the popularity of the product is one of the biggest problems to be faced! Well, this is believed to be the situation with set price betting.

One possible way to provide set prices is to give set price punters a price equivalent to the current pari-mutuel variable price. However, there are many indications that set prices will be very popular - far more popular than the variable prices provided by the current system. In some localities, such a high level of popularity may mean that relatively few punters would want to bet at a variable price. That may result in a relatively small variable price pool against which set price punters can bet thus restricting the operation of the system unless something is done to prevent that situation.

Of course, if necessary, something can be done. Any situation of this type need not be a problem because, as is generally the case, a price differential can be used to regulate supply and demand.

In fact, any differential between set prices and variable prices has a dual effect. This is because not only would a somewhat lower price for set price bets assist in dampening excess demand for set price betting, but it would also supply the funds with which to provide better variable prices. In turn, better variable prices would attract funds to the variable price pool, especially if the opportunity is taken to promote that advantage.

There can be little doubt that demand for set prices can be controlled to whatever degree is required by reducing those prices. Examining the most extreme case illustrates the point: if prices were zero, demand would also be zero. So, clearly there must be a point at which demand for set prices will be at an acceptable level.

Without this level of control, it is possible that there might be situations where demand for set prices might be so great that there would be an inadequate variable price pool against which to bet. But clearly this situation can be avoided. [top]

Even More Control via Early Variable Prices

Not only can variable prices be increased but, if necessary, the prices for early variable price bets can be increased even more.

For a typical Saturday gallops race on an average Australian track, currently the number of variable price punters placing their bets early gives a variable price pool which is more than adequate for set price betting to begin immediately after the finish of the previous race. In fact, at the moment, the variable price pool at that time is about 10 times what is required to cater for set price bets of an average size.

While it would seem likely that an adequate number of variable price punters would continue to bet this way, fortunately the operation of the SPT does not depend on that being the case. This is because it can be arranged for early variable price bets to receive a better price than later variable price bets. This would encourage more early variable price betting and, if it was considered necessary or desirable, this could always be used to ensure that there was an adequate pool at an early stage against which set price punters can bet. [top]

Reasonable Settings Cater for Extreme Conditions

It might be thought that there could be a negative effect on the operation of the system if set price punters are given the opportunity to lock in the best price as prices fluctuate during betting.

In particular, it might be thought that perhaps set price punters might obtain bargain prices from the less accurate, early market and this would result in variable price punters being at a disadvantage because the end result would be that their prices would be lower.

However, providing a generally better price to variable price punters also works to counter any such negative effect. As a result, the system is fair to both types of punter. In particular, the response of the system indicates that a problem is not likely to occur:

	Even in a situation where a price is plunged from 19/1 to 1/1 (an extremely large plunge) and an even spread of bets occurs after the plunge, only a 5% differential between set prices and variable prices is needed to ensure that the resulting variable prices are better than normal tote prices (see Example 1).
	Importantly, this corrective effect occurs quite quickly - after a volume of set price bets that is less than the volume of the initial variable price bets. Typically it would be expected that the final pool would be about 10 times the initial pool and such an increase in the pool would dilute any negative effect even further.
	In addition, the 5% differential can be increased if necessary. Put simply, if the differential is large enough, not only can the compensating effect be made much larger, but at the same time any problem is reduced because the lower set prices mean that there is less incentive to place set price bets.
	It is expected that punters will not be able to resist what they perceive to be a bargain and, as a result, most large adjustments to prices would occur early in betting. But, of course, this is also when the pool is at its smallest. Therefore, it would seem that the prices would reach a reasonable degree of equilibrium at an early stage when the pool is small. Consequently, the effect on the prices in the much larger final pool would be expected to be relatively small, even if there were large adjustments to the early prices.
	What is more, there are versions of the SPT that can respond very quickly to minimise the effect of large bets. The examples shown do not use a version of that type but instead use a version which is believed to be able to deal adequately with the situation and which illustrates a likely typical operation of the SPT. Should more reactive versions be necessary, they can be implemented. But if there is no need to restrict set price punters who make larger bets then it is clearly not good business practice to do so. [top]