Why (online) exchanges are beneficial, part 431.
Earlier this week, the world of tennis was shook with what for all intents and purposes looks like a fixed match – in financial markets what would be called a case of insider trading – (as reported by the Telegraph):
Tennis was at the centre of a major scandal last night after irregular betting patterns on a game involving world No 4 Nikolay Davydenko prompted the ATP to launch a match-fixing investigation.
Nikolay Davydenko pulled out of his ATP clash with long-shot Martin Vassallo Arguello promting Betfair to suspend betting ion the match
Nikolay Davydenko: his retirement aroused Betfair’s suspicionsBetfair, the internet betting exchange, took the unprecedented step of voiding £3.4 million of wagers placed on the Russian’s second-round clash against Argentine Martin Vassallo Arguello at the Poland Open on Tuesday after becoming concerned by an unusual drift in odds during the game.
Betfair were alarmed that there was a huge increase in the amount of money being placed on Davydenko to lose after he won the first set 6-2.
At the start of the match, punters were being offered odds of 20p for every £1 placed on No 1 seed Davydenko to beat the world No 87. But after the Russian won the first set, the odds lengthened to £2.30 for every £1 staked on him. Arguello won the second set 6-3 before Davydenko withdrew from the match in the third set with an injury, despite leading 2-1.
The irregular betting, coupled with the vast amounts of money wagered on the game, were enough for Betfair to suspend paying out on the match on Thursday evening. Following a meeting of their integrity investigators yesterday morning, Betfair voided all bets – the first time they have refused to pay out.
An investigation has been opened and while the presumption of innocence should be respected, obviously suspicions are focused on Davydenko and his entourage. While not exhaustive, I’ve been scanning the headlines surrounding this story and have been pleasantly surprised to not see a flood of shrill calls for the end of exchange markets like Betfair. Perhaps the common wisdom has finally come to accept the idea that online exchanges (in any market, in any instruments or outcomes) are ultimately the best weapon in the fight against corruption and illegal dealing. While the ease-of-use and liquidity they provide helps legitimate and illegitimate traders equally (and in this respect can fairly be said to make illegal dealing easier), the brutal transparency and audit trails intrinsic to these electronic trading venues massively increases the odds of identifying and prosecuting illegal trading quickly and efficiently. Indeed, by luring this sort of activity into the open (through the seductive ease of transacting on-exchange), I think platforms like Betfair will be one of the strongest drivers of eliminating corruption in sporting events – much as the rise of stock exchanges a century ago did much to marginalize and eliminate the most corrupt practices previously prevalent in financial and business markets. ‘Fixing’ is as old as sports itself, what is now different is there is a real opportunity to identify and catch the fixers, and almost in real-time.
