What are the odds? An insider perspective from the political betting market

I also think the scrutiny of bookmakers predictions will naturally increase. Straight-forward Yes/No or Remain/Leave choices are a simple set of odds to communicate into the laymans terms so craved by journalists or the viewing public.

bookieJBookmakers odds are becoming an increasingly used source in the coverage of political events in press, television news and particularly digital press. Its like the wisdom of crowds and a big pig. One only has to look at the pedestal American statistician Nate Silver was placed upon by the worlds media after correctly predicting US presidential elections. The anonymous nature of the way users trade on exchanges, and because there is no odds-compiler/trader overseeing the market means there is no one to interview on the reason behind price moves.

Of course I could say Yes hes odds on at 1/2 to quit by the weekend!, but the public would see the cynicism behind such attention-seeking odds. Unlike some newspapers Im not expected to lead a customer a certain way or dictate their opinion.

But a number of firms do employ specialist politics traders and our role is largely to be ahead of the curve. Whether right or wrong in our analysis, we can see why bookmakers are now seen as a pundit of interest if not always of great accuracy!

Bookmakers and the media

I expect the trend of bookmakers odds being used by news media will continue, and over time I suspect the analysis of those odds will improve. But its critical my odds are as correct as possible, or my end-of-year figures wont make for a particularly pleasurable appraisal from my manager. Yes, 3m has been traded on Betfair, but the price it has settled at is very much an average of all the bets placed. A traditional bookmaker can be found on the high street, on the internet, on a racecourse or operation through a call centre. This theory is based on the fact that The Machine (as its known) turns over vast amounts of money, and that the market ultimately finds the right price- betting odds as a representation of perceived probability. I sit at my desk staring at the horror of the Brussels attacks unfolding before my eyes. There are two sources for bookmakers odds the first being a traditional bookmaker. So while Betfair is, of course, a great rival to traditional bookmakers, we must acknowledge its relevance.

There is a belief that many in the bookmaking industry prescribe to that the Betfair price is always right. Ask 1,000 people and the average guess will probably settle on an answer vaguely close to the pigs weight. 8.58am, Tuesday 22ndMarch. Bookmaker odds are priced to reflect probability as accurately as possible. Im not saying there arent bookmakers out there that wouldnt do such a thing for press, but respected journalists tend to only work with respected bookmakers.

The Machine is a reference point to myself, as can be seen on the morning of the Brussels attacks but I cant let myself be governed by it. It allows the exchange user to both be the punter and the bookie.

betting

Odds on?(Image:Stef LewandowskiCC BY-NC 2.0)

So why do bookmakers employ people to compile politics odds, when there is such a strongly-established market anyone can monitor? At a number of smaller offshore bookmakers the answer is, they dont. Two clear binary outcomes are bookmaker odds friendly. If youd like to bet on the next minister to be shuffled out of the cabinet, again you cant do that on the exchanges. Yet we rarely discuss how these odds come about. Well, thats the theory.. Here, Jamie Loughead outlines the difference between the expertise of the traditional bookmaker and the wisdom of the crowds of the newer betting exchanges and provides insights into his work for a well-known British bookmaker.

In my opinion it is completely legitimate that forhuge political events, journalists refer to exchange price invariably Betfairs. The second source is a betting exchange, by far the most prominent being Betfair. I attend lectures, speak to politicians, network with political journalists, and show sympathy to civil servants as they whinge about their departments latest policy, never mind the television, press, and Twitter research that any good political nerd will do. Im as disgusted as any of the millions of people watching around the world, but calmly send an email to my colleagues in the trading room: all political betting suspended until further notice. While the current Betfair price for the referendum is seen as a strong line due to the millions having been traded, Betfair doesnt trade on many political topics. Weve all heard a loudmouth on Twitter proclaim that Brexit is a certainty, or a work colleague claim Brexit is an impossibility but would either put their house on it? When people back up their opinion with money and ultimately a market is formed, the figures involved are in the public interest, arguably more so than polls. Make no bones about it, we dont offer politics odds for the goodness of our own hearts we do it to make profit. So producing topical daily betting markets that react to the latest news is one area where certain traditional bookmakers undeniably lead the market.

The volume at which such odds are used by news outlets seems to have increased massively in the past five years in line with the growth of online sports gaming. Such companies just hide behind Betfairs prices, and add a bit of profit margin either side (in fact the offshore bookmakers really ought to be the second distinction).

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bookieJJamie Loughead is a political odds-compiler for a well-known British bookmaker. 45 per cent of adults recently surveyed had gambled in the last week a figure all the more staggering when one remembers that the UK boasts over 9,000 betting shops, 59 race courses, plus other channels such as desktop computer or call centre as a means to get a punt on. The market has spoken.

Setting the odds

Traditional bookmakersvs Betting exchanges

First, a couple of distinctions within bookies odds. On an exchange, a user can both place bets and lay bets but trades against other members of the public. If youd like to bet on who the next UKIP leader will be, you cant do that on the exchanges. This accounts for the vast majority of bets struck in the UK. Still, the desire for bookmakers opinion as a source continued, leaving a number of bookmakers blushing alongside pollsters and pundits on results day in 2015. For example, if high street bookmakers are offering 2/1 for a horse to win a race but you dont think it will win you can offer 3/1 for it win on Betfair, where your offer can be taken by another user. In fact, outside of the huge political events, Betfair very rarely has a market up, and even rarer is thereis enough interestin it for you to have any great faith in the strength ofthe price. Very occasionally Ill receive a text from a journalist saying any chance for some odds on Joe Bloggs to stand down as MP this week? Often Ill text back saying 33/1, knowing that while my odds are probably about right, Ive hardly given the journalist the petrol they wanted to pour on the fire.

I cant speak for counterparts at other bookmakers, but I spend a great deal of time researching my markets. In that spirit, Im happy to predict one thing, which Id make strong odds-onwell make mistakes!

Ironically, the two general elections in this period of feverish bookie-quoting havent appeared likely to yield binary outcomes, with many bookmakers predicting complicated coalitions in both 2010 and 2015. At 9.05am I check the referendum odds on a leading betting exchange and see the odds on Brexit have fallen from 2/1 to 6/4, a 7 percent move in just minutes. Thousands of people form that market some politically much better informed than the average politics trader Im sure, but a great many arent. This has been helped by the Scottish Independence referendum and upcoming EU referendum (plus the Alternative Vote referendum in 2011). Its time for an examination of this trend, and for there to be a degree of transparency about how bookmakers arrive at these figures.

Also, while it is great for a bookmaker to receive press for their odds, it would be foolhardy to frame their odds to attract publicity. So when I offer my referendum odds there is a small profit margin there, as there is with Betfair. As I write the EU referendum betting market on Betfair has traded 3m of bets, and estimates a Remain vote to be approximately a 66.6 per cent shot (at 1/2) against a Leave vote of 33.3 (at 2/1). Theres no agenda behind them, theres no politics. But we live in an age of 24/7 news and the trend of betting odds in newscoverage looks likely to continue. Political traders like myself ought to be like metaphorical pig farmers who could accurately guess the pigs weight within a few pounds. And predictably I would walk into work the next day to discover my company had laid a number of bets on Joe Bloggs to stay onas MP, at the far too generous odds-against. Theyre a good gauge of how the public assess a referendum or an election will go. Its not for me to predict winners as such, its for me to predict probability and to foresee impacts ahead of them happening. Humans have been seeking words of wisdom from fortune-tellers for hundreds of years and maybe bookmakers are now being given such a platform by the media. The market never sleeps.

About the Author

Theres no shortage of people queueing up to criticise bookmakers. His political odds are often used by news media, and he has written about politics as a freelance journalist.

Where an exchange is less useful is for comment. And I do this because I know that this gives me the best possible chance of being ahead the curve. If you asked a handful of people to guess its weight you could have guesses ranging from 5 stone to 10 stone