Inter-Market Arbitrage in Betting

New entry, strategic diversity and efficiency in soccer betting markets: the creation and suppression of arbitrage opportunities

“…Recently, Franck et al (2013) analysed bookmakers' odds and parallel betting exchange odds for a sample of 12,782 European soccer matches over a seven-year period, 2004-05 to 2010-11. They found that cross-bookmaker arbitrage opportunities existed in 0.8% of matches in their sample, which included only PTBs.…”

“…Conclusions regarding the existence of arbitrage opportunities vary with the market under investigation. Arbitrage opportunities arise more frequently between market structures than within market structures (Edelman and O'Brian, 2004;Franck, Verbeek, and Nüesch, 2013). To date, studies analysing arbitrage in betting markets have considered only bookmakers operating as PTBs.…”

“…As the main providers of liquidity, bookmakers essentially take large positions against their customers (or against particular event outcomes favoured by customers) rather than necessarily matching sellers with buyers and simply earning the commission from the spread (overround). Franck et al (2013) suggest that bookmakers also, effectively, choose the bettors against whom they take such positions. They achieve this by monitoring client trades and restricting service to those profiled as potentially skilled.…”

“…Given the significant differences in the structure of the bookmakers' models, potential arbitrage between the two types of bookmakers may be regarded as inter-market opportunities. Franck et al's (2013) proposition that bookmakers set odds to maximise long-term profit from an increased customer base, rather than to maximise profit per game, is novel in linking oddssetting with the bookmaker's option to withhold service from those clients it believes to be informed. 2 This presents a distinction between betting and other financial markets, which should be acknowledged when the efficiency of bookmakers' odds is investigated.…”

Information Acquisition in Ostensibly Efficient Markets

“…Marshall () found opportunities—or ‘Dutch books’—across bookmaker quotes and across sports, and Franck et al . () found opportunities across bookmakers and the Betfair betting exchange regarding football (soccer) matches. My innovation is to consider the incidence and duration of opportunities across pre‐match (no information) and inplay (information) trading periods in sports betting, and therefore look more generally at the dynamic interaction between market efficiency and the incentives to make markets efficient.…”