Since putting new rules in place this year to require computer-assisted wagering players to bet further ahead of post time than "retail" bettors, the New York Racing Association has seen a reduction in late-odds volatility.
NYRA had hoped for such a reduction when, in February, it placed restrictions on how close to post time CAW players could wager into its pools. This effectively required high-speed wagers to be placed a few minutes before the retail players' deadline, which is when the gates open for a race.
An initial internal study of how new NYRA restrictions on CAW players have impacted pari-mutuel pools documented these decreased instances of dramatic late odds swings and reduced the degree of those late odds changes. In discussing the results of that study in a May 29 conference call, NYRA president and CEO David O'Rourke said the CAW policy changes aimed to eliminate those late odds changes that have frustrated retail players.
"This is all about the player; the customer experience over the course of specifically the last year, but even the last few years," O'Rourke said. "We've been hearing frustration ... primarily with late odds movements."
The review showed that in races from Feb. 11-May 25, with the new CAW guardrails in place, volatility in NYRA's exacta pools has been cut in half. To properly measure volatility, NYRA worked with the Thoroughbred Racing Protective Bureau, a subsidiary of the racetracks' Thoroughbred Racing Associations, to develop a measurement of the average deviation in odds changes for each horse in every race. The higher the number, the greater the volatility.
Jack Jeziorski, president of NYRA Content Management Solutions, highlighted some of the study's details. The program assigned a 5.95 volatility rating to NYRA races in January and that rating checked in at an average of 2.59 from Feb. 11-May 25. Those volatility ratings are metrics based on the average deviation in odds changes across the entire field in a race. A lower number indicates reduced volatility.
Jeziorski noted that the day before the new CAW wagering requirements were implemented, NYRA saw two races with a volatility rating of more than 12. While numbers still vary from race to race since the requirements were added, the exacta pool volatility has consistently been under 3.
CAW refers to betting from players who rely on computer algorithms to scan wagering pools and find value relative to any handicapping opinion. They typically are large-volume players who receive large rebates based on that significant handle. They also typically have the advantage of being the final players in the pools, as their computers allow for hundreds or thousands of wagers to be placed through multiple pools just before they are closed.
Over the past couple of decades, CAW has increased its play to billions of dollars, accounting for an ever-larger percentage of North American pari-mutuel handle. As pari-mutuel wagering pits one player against another, CAW's success has resulted in reduced winnings for every other player, often referred to as retail players.
In placing those large wagers in the final moments before pools close, CAW handle has caused, or contributed to, large odds swings that may not fully show themselves until after the race has started and the pari-mutuel system catches up with tabulations of the final pools. At tracks throughout the country, this has resulted in frustration from retail players who may, for instance, bet on a horse at 5-1 seconds before the gate opens, only to see the odds drop to 5-2 by the time wagering is halted. As betting is about finding value, these odds changes have frustrated retail players.
For the past several years, NYRA has attempted to address the issue of late odds changes. In July 2021, NYRA became the first racing organization in the United States to establish a timing restriction for CAW activity, prohibiting such wagering in its win pools when the countdown to post reached "2 MTP." (The pari-mutuel system allows NYRA and other racing associations to monitor and regulate handle from CAW operations.)
A NYRA review of relevant data and information since making that change suggests late-odds fluctuations in the win pool have been reduced. This year, NYRA has added more guardrails. The new standards put in place in February require CAW activity in all other NYRA pools to cease at "1 MTP," or one minute to post. The "2 MTP" standard remains in place for the win pool.
O'Rourke is pleased that these changes have also reduced volatility in those pools.
"We're in pari-mutuel. In the sense that we're trying to improve the experience of the wagering in terms of who wins the game, that's not really in our purview at all," O'Rourke said. "But as we're looking toward this objective (reducing late-odds volatility), we've developed some tools."
That "1 MTP" standard effectively allows retail players about three minutes to wager after CAW players have concluded their play. The "1 MTP" occurs at 1:59 ahead of post time when it changes from "2 MTP" to "1 MTP." Then it takes some time to load the horses in the gate.
In requiring CAW players to place their wagers earlier than retail players, NYRA has eliminated one advantage CAW players have enjoyed—and continue to enjoy at other tracks: essentially always being last in the pools. (This advantage is because of computers being able to push through hundreds of wagers in seconds and the algorithms' understanding of what the final odds will be after such wagers are made.)
The elimination of this advantage likely explains why CAW players have reduced their wagering in these pools. NYRA officials said Friday that since the new requirements were put in place, CAW has fallen from 20%-22% to 12%-13% of overall handle. NYRA officials acknowledged Friday that retail players have not made up for those losses in handle, but they are seeing some positive signs on that front.
"There's definitely a cost to this," O'Rourke said. "Now what we are starting to see, though, is some signs—and these are just indications—that the higher-end (retail) players are coming back into the pools."
Of any track or racing association with a high percentage of CAW play, NYRA has taken the most action toward trying to address concerns of retail players. For retail players who wish to wager in pools free of any CAW action, it offers a Pick 6 pool and a late Pick 5 pool for retail-only.
In reducing volatility in the pools that allow CAW, the numbers suggest that retail players have a better idea of the final odds as they place their wagers. Long term, that should be attractive. (There are some big retail players also capable of shifting odds, and CAW teams can put in some wagers under the six-per-second standard that defines such wagering.)
O'Rourke believes the reduced volatility has made for a better customer experience, but acknowledges that there's been a cost as CAW players have reduced play this year and retail players have not filled that loss.
It could improve over time, though. O'Rourke said retail handle has increased in the win pools, which have had the "2 MTP" requirement for CAW nearly five years, allowing for a longer-term understanding. As for the pools affected by this year's rule changes, NYRA officials acknowledged that some added marketing to retail players also could provide a boost.
The bottom line is NYRA has seen enough positives in the reduction of volatility—which O'Rourke said is the biggest concern from retail players—that the track operator remains committed to the policies it put in place in February. That's not to say NYRA is writing anything in stone, as it plans to closely monitor policies and consider tweaks or new ideas going forward as it looks for the right balance.
"There's definitely a cost, but this is an investment in the product and the player, and we're going to play it out for a while," O'Rourke said. "We'll see how the market reacts over time. ... I think we're somewhat on the right track here."
