Do you think the average punter knows much about the bookmakers market percentages? DOMINIC BEIRNE: In 2010, I conducted a punting master class for the Australian Jockey Club, the attendees at which ranged in racing experience from five to fifty years. I would say knowledge of percentages was generally lacking. The easiest way to define a % is the size of bet required to collect 100. So a $10 horse = 10%; a $5 horse = 20%; a $2 horse = 50%. The aggregate of these individual runner percentages appears at the bottom of markets and is often referred to by presenters as the bookmaker s %. =============================================== Racegoers are well aware that, if there is a scratching AFTER they place a bet, their tickets reduce in value: they easily observe this on the pari-mutuel T.A.B. odds displays. In the case of bookmakers, since bookies have to refund money to punters who bet the scratched horse, the odds on all other runners are reduced. Now, as you have alluded to, racing does have a broad spectrum from beginners to professional punters, could you elaborate for our viewers, why a is necessary? This can be best explained by looking at a bookmaker s ledger. In this example race, the bookmaker accepts wagers of $20 each runner. His liability is $100 each runner. In this case, horse A is withdrawn: Column 5 describes the revised handle; Column 6 describes the revised liability, due to the 20c, winning tickets. Observe that without s, the bookmaker would have had liability 100, handle 80, LOSS = $20. RUNNER DIV Wager $ Payout liability Scratch Horse A, money refunded A 5 20 100 ------ ------ B 5 20 100 20 80 C 5 20 100 20 80 D 5 20 100 20 80 E 5 20 100 20 80 Revised liabilities after 20c TOTAL HANDLE TOTAL LIABILITY 100 80 100 80
================================================= Bookmakers s have long been contentious. For years we have heard complaints from punters, particularly when the bookmakers market had been set to a high %, like 150% for example. Well the complaints go both ways: punters generally have had the worse of it, but the reason bookmakers have been reluctant to agree to changes was that the recommended changes did not account the areas where the old Scale was unfair to bookies. =============================================== Can you explain to viewers, what was wrong with the old Scale? There are five areas where the old Scale was incorrect and its application flawed. 1) Regarding the application of the Scale, few would be aware, but when there has been more than one horse withdrawn, at different times in the betting, the rule allowed for a double dipping of tickets - most easily explained by an example: RUNNER DIV Scratch A 25c Scratch B 33c Scratch A+B, 58c on original ticket A 4 ------ ------ ------ ------ B 4 3 ------ ------ ------ C 4 3 2 1.68 2 D 4 3 2 1.68 2 Sum % 100 100 100 112% 100 Scratch A+B, 50c Stewards would determine the applicable at the time when horse A was scratched, in this case, 25c. Bookies would reframe their markets, all runners shortening from $4 to $3, as shown in the Column 3. Now let s say another horse, B, is
withdrawn. The Stewards would then determine the applicable to this runner as 33c. The Australian Rules of Racing prescribe that Stewards should add the 25 + 33 and deduct 58c on all tickets placed before the withdrawal of A. The Column 4 displays how bookmakers would reframe the remaining runners, C and D. The Column 5 displays the impact of deducting 58c. Observe that the bookies now have an increased advantage of 12%. Column 6 displays what should have occurred a of 50c - and this will be the methodology from now on. That is: The s to winning tickets placed before the scratching of horse A, will be based on the market that existed at the time immediately before the withdrawal of horse A. Here is another example under the old Rules of Racing: in practice, the ramification of the old rule is horrendous. RUNNER DIV Scratch A 40c Now Scratch B 39c Column 3 Scratch A+B, 79c on original ticket A 2.35 ------ ------ ------ ------ B 4 2.4 ------ ------ ------ C 5 3.0 1.83 1.05 1.9 D 8 4.8 2.93 1.68 3.05 E 10 6 3.66 2.1 3.9 Sum % 110 112 116 202% 110 Scratch A+B, should have been 62c Often, but not always, punters were protected against this rort by Stewards who could invoke Australian Rule of Racing which allowed for them to command bookmakers to pay out the official TOTE dividends. ============================================= I know one of the challenges and a point of real conflict was that the old Scale applied a certain, no matter what aggregate % the bookies market was set to.
2) Our Company, Intelligent Wagering Solutions has solved this problem. The old Scale contained significant bias. When the sum % was very close to 100%, the bias was in favour of the punter. However, more often, the bias was in favour of the bookmaker, and this bias became larger and larger as the aggregate market % increased. This is well displayed in the Table with three separate markets, set at 100%, 150% and 200%. RUNNER DIVS this example race set to 100%. Deduction 47c DIVS this example race set to 150% Deduction 47c DIVS this example race set to 200%. A 2 ----- 2 ----- 2 ----- B 5 2.65 2 1.06 2 1.06 C 10 5.3 5 2.65 2 1.06 D 10 5.3 5 2.65 4 2.12 E 10 5.3 10 5.3 4 2.12 Sum % 100 94 150 188 200 283 Deduction 47c BIAS - 6% + 38% + 83% The basic principle is that the s, when applied, should result in a market which sum % is equal to the sum % before the withdrawal(s). The IWS Scale achieves this. Everyone agreed that this was an essential principle to uphold. One impact of this principle is that a is applicable when outsiders are withdrawn. As you would witness on the Tote, a 100-1 withdrawal results in every other runner being reduced by 1%. It isn t always noticeable, but it s there: $10 horses may reduce to $9.90; $20 horses may reduce to $19.80. The old Scale used to cut out at 50-1 that is: when a horse at 60-1 was scratched, there was no. Yet look at the old Scale in action: Presume there was a false start, resulting in the withdrawal of a number of horses and these were outsiders. The old Scale
applied no, yet the sum % of the withdrawals was significant. RUNNER DIV Old Scale IWS Scale Deductions 8c A 2 1.84 B 6 5.52 C 8 7.36 D 10 9.2 E 21 19.32 F 26 23.92 G 61 SCR. --- H 61 SCR. --- I 71 SCR. --- J 81 SCR. --- K 101 SCR. --- L 101 SCR. --- Sum% 106 98 106 In order to be faithful to this essential principle, the new Scale will occasionally apply a to a single 100-1 withdrawal. In the world of swings and roundabouts, punters can t complain. The penny lost in this circumstance is easily countered in other circumstances, the new National Scale of Deductions. ============================================ That sounds much fairer to bookmakers, but it is obvious that the punters have come out as the big winners; were there any other concessions made by bookmakers? 3) Yes. Bookmakers conceded that markets, which were set at high aggregate %, did not warrant having s that resulted in a reframed market at the same high %. The negotiated position is that any market with aggregate % > 140% before the withdrawal, would have s applied that would reframe markets to halfway between 140 and the pre-withdrawal sum %. Reframe % = 140 + {(sum% - 140)/2}
RUNNER DIV Scratch A 47c Old Scratch A, 12c IWS A 2 ------ ------ B 2 1.06 1.76 C 2 1.06 1.76 D 4 2.12 3.52 E 4 2.12 3.52 Sum% 200 284 170 In this case, the reframed market should be 170% (halfway between 140 and 200). The resultant for the withdrawal of this $2 (Even-money) chance is 12c, compared to 47c in the Old Scale. ================================================ Does it make any difference to s what price the winner was? 4) Yes. One of the challenges IWS faced was that bookmakers do not deduct equally all runners. Under the supervision of the Australian Racing Board and Racing NSW Stewards, IWS constructed a three-dimensional Scale to satisfy the desire of bookmakers that a Scale be devised that considers: a) The long-shot bias - a phenomenon in markets where outsiders are over-valued b) Weight-of-money interest is proportional to winprobability. In this table, Column 3 displays the way the market would be reframed if equal s (in this case, 35.6c) applied to all runners. But Column 3 does not reflect the way that bookmakers behave.
RUNNER DIV Reframed market if equal s of 35.6c all runners Bookies may prefer to reframe this way Implied s applied by bookmakers, Column 4 Reframed market due to IWS Scale of staggered s A 1.8 1.16 1.125 37.5 1.134 37 B 2.5 ----- ----- C 13 8.37 8.2 37 8.19 37 D 35 22.5 23 34.3 23.45 33 E 101 65 91 9 83.83 17 F 101 65 91 9 83.83 17 G 101 65 91 9 83.83 17 H 101 65 91 9 83.83 17 I 101 65 91 9 83.83 17 J 101 65 91 9 83.83 17 Sum% 112 112 112 112 IWS Scale of staggered s each runner Column 4 in this Table displays the reframed market most bookies would construct following the withdrawal of horse B. The $101 runners may be reduced by some bookmakers to $81 or, with others, remain unaltered at $101. Column 5 displays the implied s that the bookies have applied. You can observe that long-shot runners have been reduced by a lesser amount than favoured runners (9% compared 37%). Intuitively bookmakers are aware of: a) The long-shot bias - a phenomenon in markets where outsiders are over-valued b) Weight-of-money interest is proportional to winprobability. Column 7 displays the s that will apply to this race from 1 August 2011. Column 6 displays the resultant reframed market. So, compared to Column 3, punters and bookmakers are variously better off, but importantly, the IWS Scale is overall equitable to both.
A really cool thing about this for long-shot punters is that occasionally, long-shot winners will have no applied, even when the scratching may be high in the market. So next time you bet a bolter which wins and there is no, thank your bookie with an extra smile. But bookies can t complain, they can t have it favourably at both ends, whilst satisfying the principle: the sum % before and after withdrawal(s) must be equal. Members of the Board, Australian Bookmakers Association agreed the logic as written. ============================================== What about the Scale for a PLACE, have you had to do anything there? 5) The PLACE s were our biggest challenge. If you consider the many errors in the Old Scale, the PLACE s take the cake. The old Scale regularly disadvantaged the bookmakers and quite significantly. Place s were calculated this way: ~ Determine the place odds by dividing the win odds by 4 (the old each-way equation) ~ Convert the place odds to a percentage ~ Divide the percentage by 3, accounting 3 placegetters to pay. As an example: a 9-1 chance is 9-4 for a place; 9-4 as a % = 30%; divide 30 by 3 and the was determined as 10c for a withdrawal whose win odds was 9-1 or $10. Since the old Scale is set a little higher than 100%, Column 6 displays the slightly smaller s, top end of the market prices. This table displays five examples:
WIN DIV Examples WIN ODDS PLACE ODDS = ¼ WIN ODDS PLACE ODDS as a % PLACE % divided by 3 3 2-1 1-2 66 22 21 7 7-1 7-4 36 12 11 10 9-1 9-4 30 10 10 21 20-1 5-1 16 5 5 41 40-1 10-1 9 3 3 Old Scale s The old Scale applied equally the s regardless the odds of the place-getters. But look at the impact on a short-priced runner, applying the old Scale. In this example, the bookmaker may be offering place prices as displayed in the Column 3. The withdrawal of horse B invoked a of 21c. RUNNER DIV PLACE DIV PLACE RETURN after Scratch B 21c A 1.8 1.10 $0.87 B 3 1.25 ------ Others You can see that the return to the punter, for backing successfully the placed horse A, would be to lose 13c out of every dollar wagered. Gratefully, the Rules of Racing protect the punter against this anomaly, by ensuring that at least $1.00 must be paid. But, neither the bookmaker nor the punter is the winner. The punter has to watch the race, hoping horse A runs 1 st, 2 nd or 3 rd, just to get his money back. The bookmaker is theoretically 13c out of pocket and this 13c is not accounted elsewhere in the s applied to other place-getters.
The correct applicable to horse A is 6c. Consequently, larger s than 21c apply necessarily to the other placegetters. Deductions, when applied to the full face value of the ticket, are inversely proportional to the win-probability. One extreme example validates this point. Let s say this was a WFA race with four top class horses and four Maiden runners. For the sake of making this point, let s say the Maiden runners have no material possibility of running a place. Let s say the bookmaker is really generous and sets his board to 100% the win and 300% the place and he sets his Place Dividends as per Column 3. If horse B is withdrawn, the three remaining runners must be reduced necessarily to money back, $1.00. Put another way, 100% of the winnings are reduced from the ticket, each the 3 runners. Column 5 describes the implied s Column 3 to Column 4. RUNNER WIN DIV PLACE DIV Reframed PLACE MARKET A 1.5 1.03 1.00 3c B 9 1.48 === C 9 1.48 1.00 32.5c D 9 1.48 1.00 32.5c E F G H Sum% 100 300 300 Implied Column 3 Column 4 ==============================================
That may be the hardest change for punters to get used to. That may be true, but punters and bookmakers should take security in the fact that the IWS Scale has been appraised and approved, under the supervision of the Australian Racing Board, by the National Conference of Stewards, the Australian Bookmakers Association and a delegation which included some of the shrewdest professional punters in Australia. The mathematics behind the new Scale has undergone a lot of scrutiny! ============================================== I can t imagine that the complex algorithms driving the IWS Scale could allow for simple lookup tables, such as the one currently found in a race book. Am I correct? Yes, that s correct. In fact, the IWS Scale is generated with thousands of lookup tables. My fellow director, Tim Wooller, is a gifted mathematician and computer scientist with decades of experience in the racing industry, having designed and built the on-course Totalisator Systems used by Tabcorp. Lookup tables in race books date back to the middle of last century. In Australia, we have got used to the s being deducted on the full face value of the ticket. An alternative Scale could be designed that deducted from the winnings, but since Australia has moved from quoting odds-1 to dividends, it made much more sense to maintain the traditional methodology. Either way, due to the necessary complexities of points 1) to 5) above, lookup tables are no longer printable. =============================================== How will the s be determined each race day? The Scale has been licensed perpetually by IWS to the Australian Racing Board. Race day Stewards and officers of The Australian Pricing Network, which body disseminates prices from racecourses throughout Australia, have access to the software program that calculates the s.
Deductions will be announced in the format that has been traditional across Australian tracks, coinciding with the announcement of correct weight - because it is not until Correct Weight that the full field starters is certain. ================================================ Wouldn t the software app be a valuable tool for fixed-odds bookmakers? IWS will be marketing to bookmakers a product called IWS_REFRAME. Benefits of IWS_REFRAME include: ~ Instantaneous reframing of markets after a withdrawal, ~ Thus limiting the downtime trading fixed odds, resulting increased turnover ~ No more costly clerical errors ~ No more disputes with punters ~ No more hassling from Stewards to reset the market ~ Accounting for the pricing profile, the spread of market percentages within each race ~ Accounting for long-shot bias, the phenomenon in markets where long shots are overvalued, compared to win-ability Due to IWS_REFRAME deploying identical s to the official National Scale of Deductions, when integrated into current software systems, additional benefits would be: ~ Instant recalculation of runner liabilities, thereby ~ Providing improved risk-manageability of books If bookmakers software does not currently provide for accurate PLACE markets, IWS_REFRAME can provide PLACE markets, which are ~ Customizable to any desired sum % For enquiries not addressed in this paper, email IWS: info.iws@bigpond.com