I don't disagree, but retail isn't the tail wagging the dog. Algorithmic trading and bots have brought convergence to Merton's ideal. It's completely phucked-logic, but it is what it is.
All these mean-reverting bots circle-jerking under two sigma. You've got these tiered vol-regimes... no vol under two sigmas and historic vols should we trade off a cliff. Everyone and their bot is in the convergence trade. Mean-reversion is the mantra. FWIW, the first weekly bear-reversal bar in the GBPJPY, USDJPY and EURJPY will signal the end.
True. I guess I'm trying to think through the inherant marketing limitations of a mere auction market i.e. Vegas versus a two-sided auction like TS.
Right, but a bet on the favorite at 3:1 is a bet against the 'dog at 1:3, sans vig. It's simply a matter of dissection.
Correct me if I'm wrong, but the bookie himself is not taking the other side, it's one of the bookies clients who would take the other side. If the bookie thinks he can't find a client to take the other side, then he may not want to take the inital bet in the first place. The bookie ideally doesn't care what the outcome of the underlying event is, he just collects the juice if he's laid off all his bets properly.
I think this is an excellent question. Has the rise of electronic markets made markets more efficient, yes or no? Someone could write a good book about this. Also, it seems that the rise of computers has certainly contributed to the death of the floor as we know it.