Huge stakes were driving significant price changes for Remain but it was a lose-lose for us

Paddy Power's politics trader Stephanie Anderson reports...

The UK has voted for Brexit, David Cameron has resigned and Boris Johnson is now favourite to be next Prime Minister.

High rollers had continued to invest in Remain betting yesterday, but the sheer volume of small stakes on Leave in the last 24 hours managed to force Paddy Power into a lose/lose scenario. The small stakers have been paid off today.

Paddy Power has installed Johnson as 11/8 favourite to replace Cameron this morning as Prime Minister after the Tory leader announced he was to step down following the EU referendum result. Johnson, is followed in the betting by Theresa May and Michael Gove who are available at 2/1 and 6/1 respectively.

Next Prime Minister after Cameron…

  • 11/8       Boris Johnson
  • 2/1         Theresa May
  • 6/1         Michael Gove
  • 12/1       George Osborne
  • 16/1       Jeremy Corbyn
  • 20/1       Sajid Javid
  • 20/1       Stephen Crabb
  • 25/1       Dan Jarvis
  • 25/1       Ruth Davidson
  • 28/1       Jeremy Hunt
  • 28/1       Philip Hammond
  • 33/1       Nicky Morgan
  • 40/1       Nigel Farage

There are other repercussions this morning. Guido Fawkes’ blog is talking up a plot to remove Jeremy Corbyn as Labour leader. Paddy Power makes Dan Jarvis 4/1 favourite to replace him, followed by Hilary Benn at 9/2. Rachel Reeves is also seeing support on Friday morning being backed from 25s to 12s, with David Miliband from 16s to 10s.

Since Cameron’s Conservative Party claimed a shock majority in last year’s general election, Paddy Power had experienced an intense build-up to the UK’s European Union Membership Referendum.Voters have now rejected the UK’s EU member state status after more than 40 years of trade and co-operation.

Paddy Power previously reported that high-stakes punters were cagey about taking Leave odds, even at generous prices like the 9/2 that was available at the end of May.

In mid-June, two big polling outfits reported 7% leads for Leave when excluding undecided voters. This represented a marked success for the Leave camp, because decided voters for Exit were growing whilst Remain numbers were static. Even then customers appeared to be reluctant to accept the trend. We struggled to sell Exit at 3.5 for days. We even attracted several five-figure sums on Remain at odds between 1.18 and 1.22 during those days.

Eventually there was a take-up of the Leave odds as the delayed effect of the polls was finally felt, but considering the consistency of the apparent popularity for Leave in the polls and the press, the odds did not settle as short as one might expect. In the last seven days, Exit odds dropped as low as 6/4 before stabilising at 9/4.

The big guns came out on Thursday, and punters wagered a whopping  £750,000 in the last week with Paddy Power on one of our biggest-ever political markets. Two single bets of £30k were placed on Remain at odds of 1/3 – the betting support for Remain was huge at this point and showed no sign of faltering.

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MAKING THE MARKET AND REACTING TO NEWS

The odds for any market are initially drawn up by analysis of a number of factors.

  • Precedents for the situation and previous election data where possible
  • General opinion and expert opinion (internal or external)
  • Polling figures, where available – huge role to play in offering a snapshot of current voting intention

Once the market is open, the changing events and updated polling figures continue to have an effect, but money placed on the runners can now be used to shape and hone the market. The market becomes, in part, an expression of the multiple investments made.

Whilst a market is running, a poll result that represents new trend of change will normally affect the traders’ opinions and also the flow of cash. During this referendum campaign, we have noted a reluctance from punters to follow the information about Leave voters growing in number, which has meant that the odds have remained surprisingly high for an Exit vote. The flow of cash simply does not fully agree with the trend that the poll information is producing. This is in contrast to, for example, the Scottish Independence Referendum where punters were all too happy to take a chance on the odds-against shot of a majority Yes vote. The result became a huge liability for the bookie, and would have been a seven-figure loss had it been returned. What we are seeing in the EU Referendum event is that although very many customers are prepared to take a punt on the Exit, it is in nowhere near the proportion that would be expected. There is a definite staunch support for investing in the Remain, no matter the odds or the information on offer.

WHO WAS BACKING WHAT

The BBC recently identified the oldest, youngest, richest and poorest voting areas in the UK. Below we see how they had been betting on the referendum, along with the most Europhile and most Eurosceptic areas as identified by YouGov.

Voters Area % Cash On REMAIN % Cash On EXIT
Oldest Eastbourne 62% 38%
Youngest Blackburn 84% 16%
Poorest Nottingham 80% 20%
Richest Kensington 94% 6%
Most Eurosceptic Havering 89% 11%
Most Europhile Ceredigion 85% 15%
Overall Market Split 76% 24%

Most interestingly, the most Eurosceptic area in the country appears to contain punters that are backing the Remain in above average proportions.

HISTORY OF BOOKIE VS POLLSTER

Polling is a hot topic since the major outfits arguably struggled to get a grip on national voting pictures in both the 2014 Scottish Independence Referendum and the 2015 UK general election. In each case, the bookies odds, or rather the punters’ investments, were seen as being closer to the mark than the pollsters. Bookies across the land lost large sums on a Tory majority in May 2015 as it paid out punters who were prepared to back what the polls said wouldn’t happen – so should we ‘follow the money’?

The split of cash on the EU Referendum market was about 76% on Remain and 24% on Exit. From this we can see the punters’ average opinion was at odds with the polling data, which suggested a level field for Remain and Exit. It appeared the wisdom of the betting crowd was saying loud and clear that it expected a Remain victory on the day.

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Reporting by Stephanie Anderson/Paddy Power