Sports Gambling Is Quant Trading Firm’s Way to Beat Market Odds – Bloomberg

Susquehanna International Group has always embraced game theory, taking employees to baseball games and using poker as a tool for teaching its traders. Now the U.S. firm is betting that gambling on sports could be its next winning investment strategy.

Susquehanna has set up a unit at its Dublin office to wager on sports including basketball, American football, soccer and tennis. The business, called Nellie Analytics, has advertised to hire quantitative analysts and computer technicians. The team already includes an ex-Goldman Sachs Group Inc. convertible-bond trader as well as a former wine trader who’s also played professional poker.

“We felt that our market-making background could be conducive to sports trading because the challenges of analyzing large amounts of data in real time is a core competency of ours,” said David Pollard, Susquehanna’s head of strategic planning and special counsel in Bala Cynwyd, Pennsylvania. “Although trading volumes for U.S. sports on European betting exchanges are not currently significant, sports trading seemed like a good domain to extend what we do in other markets, and we’ll see if the trading volume materializes.”

Illegal in most American states, gambling on sports is legal and growing in much of Europe and Asia. The market is worth about $57 billion annually, according to Warwick Bartlett, chief executive officer of Global Betting and Gaming Consultants, based on the Isle of Man. That figure could rise to $70 billion by 2022, he said.

Getting Involved

As the market grows, it’s starting to catch the eye of financial traders. Former Goldman Sachs metals trader Charles McGarraugh last year joined London-based Stratagem Technologies Ltd., which uses quantitative analysis and machine learning to build models to predict the outcome of sporting events.

There are several ways to trade sports. One is to use mass-data collection and algorithms to generate odds for games or races that are hopefully more accurate than those offered by bookmakers. Traders can also use arbitrage to profit from the different odds offered on different platforms.