Don't Steal Money from Day Traders Before They Lose It
bloomberg.com
bloomberg.com
As an individual it’s way more difficult and time consuming.
i’ve read about ed thorp pioneering statistical arbitrage in the 80s (?) which would fit the bill of “consistent returns”, but I doubt that there is any of that left close to 50 years later.
I’m wondering what all these quantitive funds are doing.
Effectively, brokers and exchanges have almost infinite ROI: with small and fixed investments in infrastructure and marketing they take _percentage_ of your traded volume.
And shady trading rooms will screw you on commissions, spread, high margins on volatile instruments, and in very unlikely event if you manage to cash out more money than deposited, they will hold your account for "review of illicit trades".
But even on real and legal exchanges far less than 50% of capital wins, I assure you.
The caveat is what most fund managers would call capacity. My trading strategy can't scale without severe cuts in those returns. It's extremely easy to buy 10 contracts and hold for 5 ticks. I've never experienced slippage at all. Operating at mutual fund sizes, I would be trading at volumes that would slip 25 ticks before filling completely. My strategy can't and won't ever scale to that level...it would degrade to negative profitability likely with two or three million dollars of daily volume. Effectively this means I have major limits to compounding...like most day traders, I merely skim returns off of a fixed amount of capital.
So yeah, I do well enough for myself, and there are thousands of traders just like me. The quant firms may be on another level, but it's not because they have better returns than you can get as a day trader, it's because they have better capacity.
Sounds like you are eyes wide open anyway.
1). never stop studying about what is going on
2). practise, practise, practise (otherwise known as paper trading) before you ever lay down any coinage
3). don't let emotions ever take you away from whatever strategy your paper trading comes up with
4). whatever the environment you had when you did your paper trades, don't allow that to change when you finally put some coinage down.
5). take a holiday from trading if the markets get too volatile (your definition of volatile applies here)
6). remember that many of your trades will lose coinage, it is up to you to determine what you put in place to mitigate this, others will make enough to cover these losses, if you keep to the rules you have.
7). if your success at paper trading does not see the same success in coinage trading, stop and do a complete review of what has happened and go back to paper trading.
8). keep meticulous records of all your trades, paper or real and continually look for further insights into yourself as you do this.
9). continually look at what your goals are and why you are doing this.
10).don't spend any coinage that you cannot afford to spend on this, in other words, keep calm and steady.
That's like saying that having a very complex system for playing blackjack to have an advantage over the house isn't gambling.
My definition of gambling is "any event in which money is bet on the outcome of an event in which the user does not have 100% perfect knowledge". If you're an insider trader, you're not gambling. If you're Joe-average day trader, you're a gambler.
Being a good gambler is a skill that can be developed. If your game of choice is the stock market, then those things he's talking about are part of how he pushes the odds in his favor.
What I think you need to add to your definition is an addendum that says that what you bet is significant enough that you will suffer significant harm from losing. So if you cannot afford to lose that $5 you put down on some race, then that is significant. if putting down $1,000,000 on some event and losing means nothing to you, then are you still gambling or having entertainment.
My father's advice to me from a very young age, was to treat all "bets" as a loss anda form of entertainment. So only use what you could afford to lose. if you cannot afford to lose anything, then you don't lay down resources on the expectation of "winning", that is the mug's game. So as far as day trading is concerned, follow the rules that I set out above, which are the same rules that I received from others who have actually been successful in day trading. Interestingly enough, I have had the same advice from those who were unsuccessful and they admit they broke the rules as laid out.
Comparing returns between income-oriented day traders and compounding-orieted mutual funds is like comparing top speed between f1 cars and endurance cars. You can certainly do it, but you're not doing anything worthwhile with your time by doing so. My strategy has high returns but low capacity and no compounding potential...simply put, I'm not competing against the S&P 500, I'm making an income. In fact, most of my excess returns end up in SPY.
Your caveat there often swallows the rule. Many bet on the market and make big bucks only to lose multiples of it later.
there's no guarantee it will be created immediately, execute at all, and if it creates a market order you might very well not like the price it does end up executing at
Today, it's extremely difficult to get information 5 minutes sooner than everyone else without insider trading. Also, doing such quick analysis can be pretty error-prone, it's not uncommon that bad stories send a stock up and good stories send it down because the price is based on the perception rather than the fundamentals. So even if you have the right information, you may make the wrong bet. I'm sure some are better than others at this, but to make money, you'll need to be better than 50% of everyone else.
You're assuming parent is trading on news, information, or fundamentals. A technical trader wouldn't care about anything you've mentioned.
I don't believe it's possible to consistently make money ignoring "news, information, or fundamentals". Otherwise you're just fitting curves to noisy data. If it could work consistently, then you would be able to read the future.
By the way, people read the future all the time: it will rain today and it will snow in four months.
I’m not here to argue if it works, I’m arguing that there are people who trade stocks with no concern for anything that you mentioned. Argue the effectiveness all you like, people still do it.
I can't perfectly read 5 minutes into the future, nor is it necessary. All that is necessary is to have a slight edge. Just like running a casino, a small statistical edge is enough assurance that any individual game outcome doesn't matter because you will have more wins than losses. And a tiny edge is not hard to do.
I'm doing fine without news feeds at all. An economic calendar and some basic technical analysis is sufficient enough of an edge to win more than I lose.
Five minutes from now I'm going to be sitting on my bed.
Five minutes from now I'm going to be male.
Five minutes from now I'm going to have a nose.
That I can read these aspects of the future has no bearing on me being able to tell the future of coin flips.
I guess you could technically call that "trying to read the future", but the (big) difference is that the horizon is on the order of probably a few milliseconds at most, not 5 minutes.
You'd think so. It turns out that there is plenty of news out there at the right time. Thing is, no-one has the time to continuously check the top 50 or so online news sources to see if their individual interests are being mentioned.
The larger corporations might be on top of things but there will be plenty of individual investors reacting to the news. You just need to react before they do.
First of all, 5 minutes is a very long period of time in the world of high frequency trading, where machines are executing millions of trades every millisecond. Secondly, the same machines are equipped with AI algorithms for reading real-time news feeds, earnings releases, etc, and reacting very quickly on the news. Thirdly, the amount of money that the machines (and their owners) are trading with dwarfs any impact that individual investors would have on market prices.
5 minutes is plenty of time, well shorter than most successful day traders who are trying to predict on 15 minute or hourly horizons, or swing traders trying to predict on daily horizons. There are plenty of trends that occur on the horizons of minutes, hours, days, even weeks.
> First of all, 5 minutes is a very long period of time in the world of high frequency trading, where machines are executing millions of trades every millisecond. Secondly, the same machines are equipped with AI algorithms for reading real-time news feeds, earnings releases, etc, and reacting very quickly on the news. Thirdly, the amount of money that the machines (and their owners) are trading with dwarfs any impact that individual investors would have on market prices.
This comment reads like a science fiction fan's made up ideas about how NASA works. You've taken snippets of vague ideas about the truth and mishmashed them into a frankenmonster that would never exist in reality.
* Millions of trades every millisecond is an exaggeration several orders of magnitude off from the real world volumes of HFT firms.
* HFT algorithms don't use AI. They wouldn't be able to react fast enough if they did. HFT algorithms in practice are rarely more complicated than linear regression.
* Those who use AI in their algorithms are doing so with incredibly varied levels of success. They are typically trading on horizons much longer than HFT firms. They are trading volumes orders of magnitude lower than HFT firms, even if those volumes are orders of magnitude higher than individual investors. From what I can tell, outside of text analysis of the potential sentiment generated by news, the finance industry is pretty pessimistic about AI.
* There are plenty of traders operating successfully across several time horizons. It is not necessary to be faster than HFT firms to be successful. Most day traders like me actually depend on the liquidity provided by HFT firms in order to be profitable; we couldn't do it without the deep books that they provide.
* Likewise, a lot of the predictability of how the market moves comes from the market effects of large actors: when you trade $100M in a day in a single direction, you move the market with you, and that creates a trend pattern that smaller traders can pick up on and take for a ride.
I doubt longer than 5 years profitably.
I do believe that insider trading is rampant. I've seen many occasions where a large corporate announcement sends a stock up or down, but hours before, you can see the price of the stock slowly slide in the direction. Obviously a certain amount of that may be random/explainable, but I've seen it a lot and my intuition says more is going on. This also seems relatively easy to quantitatively measure, I'd love to see a real analysis of it.
In theory, yes, in practice no.
The reality is this kind of short term incite based investing does not really scale. Over time the money you spend on paying people to do this is less than your risk adjusted long term benefit.
There is a company who will break down a brand new car into its component parts and by knowledge of materials and production processes can tell to a very narrow margin what the cost of producing that car is - and therefore the profit potential of each sale. The information about the number of cars sold is either public or more easily obtained than the actual company accounts (public in many jurisdictions due to car registrations).
There are other companies who will buy a bunch of iPhones for example and by carefully analysing the serial numbers can deduce to within a reasonable margin exactly how many have been sold.
Using information like this I'm sure most large trading firms have very good models of the likely performance of each publicly listed company.
I wonder how far down this rabbit hole things go. Do they have people standing outside factories counting how many cars leave on the back of the truck? Do they have access to systems like Galileo in the travel industry where they could figure out how many seats had been booked on a plane, or how many rooms were booked in a hotel? They can then take a good guess at staffing / fixed costs and arrive very much in the correct ball park.
AKA the German Tank Problem (https://en.wikipedia.org/wiki/German_tank_problem). Fascinating application of statistics.
So not everyone randomises.
To make that random would be a huge waste and also destroy the potential for creating visible patterns helpful within a lot of industries.
Edit: I just thought about redemption codes, which yes, do aim to be randomized have a huge space relative to the issued codes. In those cases, I see what you mean. Serials of digital media are often and intentionally randomized.
[0] https://www.bloomberg.com/news/articles/2017-01-27/hedge-fun...
He follows him to a private jet and finds out it's flying to mid-sized city that happens to be the corporate headquarters of a particular company. In the movie it's sort of implied that this activity is illegal.
I wonder if it actually was, and if so, why that would be different than what those hedge fund guys you reference were doing?
Yes. They do. I took a car ride with someone a few years ago who claimed to work for a consulting firm that the big banks+others hire to gather on the ground intel from companies through things like factory tours and shooting the sh*t with employees at bars near the warehouses etc.
Matt Levine writes on the topic pretty regularly. Here's an example with a number of interesting situations.
www.businesslive.co.za/amp/rdm/business/2018-02-01-matt-levine-the-fine-line-between-insider-trading-and-knowing-more-than-others/
"Meals on Wheels is accused of receiving insider information about big market movements from dozens of investment bankers. The Meals on Wheels endowment has seen 10x growth in the past 18 months. It looks like the group they provide for will be fed forever, even if we went through another Great Depression-level financial catastrophe. Should they be allowed to keep these funds? It certainly looks bad for the government to fine them hundreds of millions of dollars with the recent cuts in government-provided social programs."
This is famously the Eddie Murphy rule - it was a crime to steal the briefcase, but not to trade on the knowledge gained from the contents of said briefcase.
iirc 'Trading Places' is on netflix, and Planet Money[0] did an entertaining episode about this.
[0] https://www.npr.org/sections/money/2013/07/09/200401407/epis...
Mostly as an exercise for myself, I've been curious to make a system that would do this. Cameras on all the entrances, license plate tracking, and maintaining an "inventory" of vehicles in the facility.
You could track shift change, number of consumer vehicles (estimating number of people working), number of semis, etc.
Throw things into mechanical turk and you could categorize semis. Maybe that factory that makes big things needs one big component for every unit, and it's super obvious when it comes in on a semi. Boom, that's going to be a strongly correlated factor to production.
Consumer vehicles versus true production over time could help find increases in efficiency.
There are tons of ways to leverage little bits of data, and I think a vehicle in/out tracker would get you a LOT of information.
Of course the problem with that is getting up to the second video feeds (as apposed to delayed video feeds from SKY etc) from a fixed view point. I'm sure you could pay some money to get essentially a security camera feed at the game but that would be expensive.
Which made me wonder whether someone could turn up the night before a big game, park a drone on the roof broadcasting the video to a van with the computers processing the results while evading detection...
Totally unfamiliar with the gambling side of things. Do they set odds at the start of the game and maintain them throughout? There are already companies who will do live "coding" of game events to create a stream of data about the game. Players on the field, time on the field, location of the ball, location of the players, who has possession, possession by player.
There are some other trackers out there targeted for coaches. E.g. track player running speed. If they are going 10% slower than typical after the start of a play in American football, it's a good sign that they need to come out.
The common problem with your idea and mine are getting high enough quality for relatively modest prices. A standard dash cam isn't enough to grab a license plate, it'd have to be at least somewhat better tuned. Drone video from a distance is going to be tough to use to discern who is who and to get valuable info.
I can tell you from professional experience that is most often not insider trading. You might be surprised at the amount of meaningful information that can be legally obtained through research.
I used to (very legally) find and analyze data that would lead to better conclusions than street analysts. The results of equity earnings are basically an open secret among institutional investors before they're announced.
There was somebody who recently demonstrated that you can derive useful information from simply reading SEC filings, which orthodox theorists would presume should already be reflected in stock prices.
This industry is filled with secrecy on one side, and paradoxically, with a wealth of free information on the other side. It's just that information is so abundant and complex, a normal person has no chance of using it anyway. Especially if they think it's impossible.
The hoards of "get-rich-quick" dudes with no emotional control rushing into this thinking they can learn to day-trade in a month, loosing their life savings and then ranting on forums about how it is all just a big casino - they do not help the situation either. Well I guess in a way they do help real managers to keep their jobs.
So you keep wondering. Just stay away from the markets :)
Based on what? The conditions for stat arb to be possible haven't really changed.
Not even. After you take your brokerage's fee structure into account, you've got to nominally outperform the market by a fairly decent margin in order to stay ahead of the market. The amount by which you need to depends on the rate at which you incur those fees, so day traders are giving themselves the toughest row to hoe in this department.
Good job, you got into the same short-squeeze opportunity everybody else did that morning.
They are. Because no one can be good at that job. I think that's the part you're missing. You're deluding yourself that you've figured out a strategy for making money in a way that you beat the relevant market index consistently.
I just keep my retirement savings in a robo-investment account now, balancing ETFs. Hands off the wheel, don't think about it, don't mess with it.
[0]Fintech wasn't for me. Just didn't enjoy it. [1]StreetContxt. Cool folks, great company.
I'm the same way. I put money in, buy more shares of whatever ETF I deem worthy, and outside of the occasional sell to fund another ETF purchase, I don't touch it. It fluctuates, but ultimately goes up.
But, man oh man, do I fantasize about trading. When I look at the underlying stocks in an ETF that's doing good for me, and some of them have these massive YTD returns, I get the itch.
It's a big cut for doing something I could do manually but I'm super lazy and it's a percentage of not much money anyways.
[0] https://wealthsimple.com or https://wealthsimple.com/invite/FCU4AG if you want a referral link which gives you (and me) some extra discounts.
There's also discounts for referrals which helps lower it.
That being said, an individual who specialized in that kind of data acquisition and analysis at a firm can do well on their own by targeting specific equities with only one or two streams of revenue. But it's still difficult and that individual would probably be trading in a manual capacity.
In the 1990 you could have beaten the market by simply realizing that the PC was going to explode into an everyday item and simply focused on buying and holding the sector vs any one stock. That's not going to see huge daily gains, but on the backs of huge successes like Dell it could easily have turned ~100k into retirement money in a decade.
Oil companies are still going to be making tons of money in 10 years, but people will start to doubt their future without heavy diversification. Whichever company wins to battle for solar cell manufacturing is going to become the next Exxon, but it's going to be a long brutal slog. Still if your in your 20's buying and holding any company that looks to have an advantage in this space is a long term winning strategy even if most of them will fail.
(1) the US will move to single payer health care. Besides the growing popular support for this, there is a coming crisis of corporate, municipal, and state pension funds which are unfunded to pay for their growing health care commitments. Single payer will be used to bail out those pension liabilities.
(2) Climate change. Consider effects on real estate of the placement of storm barriers, the increases of flood tides, etc.
(3) Self-driving cars. Lots of unexplored knock-on implications of the cultural changes. Dropoff without parking may reinvigorate walkable downtowns. Driving without attention required will enable longer commutes and combined work+commute with mobile offices. Cheaper last-mile delivery may push more retail shopping online. Introduction of drive-thru services targetting unoccupied vehicles -- dispatch a car to fetch something. The now high-end service of going shopping and asking for items to be sent back to your home could become commonplace.
(4) demographics. You can predict China's growth will soon slow looking at how the age distribution is projected to change.
The only thing happening is the low value brokers/traders are being taken out of the system and automated, just like people were made redundant in other industries. But for investors who like digging in and doing their homework, opportunity is abound. Everyone else can enjoy their standard index returns to keep up with inflation.
Also - having access to flow creates substantial information asymmetry and opportunities.
I'm definitely the dumb money in the market, trading on stone age tools by comparison.
https://en.m.wikipedia.org/wiki/Bucket_shop_(stock_market)
The transaction goes "in the bucket" and is never executed. Because no trading of actual securities occurs, the customer is essentially betting against the bucket shop operator in a game based on abstract security prices.
Let's say their policy is something like, "You trade for real under favorable commissions and margins. If we decide via internal algorithms that you are liable to lose money, we will instead pocket your trade and credit you 10% of the money you would have lost back. If you win, you win in full as normal."
Would this be immoral? Illegal?
Whenever the customer wants to sell their position, you'd have to pay them whatever the value was at that time, whether the position had gone up or down. Big risk, unless you're confident that the customers are going to reliably make terrible trades, on balance.
It might still be fraud maybe if you claimed to be performing a service that you're not performing, but if you actually told your customers that you were doing it (as in the situation you ask about), then I can't see how it could be breaking any laws. And I'm not certain why your customers would even care, and might even prefer it, due to the "get 10% back if you lose everything" clause which you don't get with normal day trading.
There are arguments that naked shorting should be allowed, but it isn't allowed right now.
I guess it's sorta like the brokerage having a right of first refusal on all your trades - they have the option to take the other side of the trade first in exchange for a 10% premium. If it's clearly disclosed, I don't think it would be illegal, but it's also not a particularly new concept.
This is different because it seems the account holders were tricked into believing they were buying/selling securities, which are highly regulated activities.
Unless you mean, the broker/dealer generally offers fairly competitive spreads and so 10 pips isn't too big of a deal.
This is why being the counterparts to all your client’s trades and using the public markets only as a source of random numbers to operate a gambling operation with a fig leaf of respectability is derisively referred to as a “bucket shop” and is broadly illegal.
EDIT: Oh, that part also applies to banks with fractional reserve (i.e. all banks) but no discussion about the merits of that here please :)
However, given that hobbyist full-disclosure crypto ponzi schemes are a thing, probably the market has an appetite for anything.
Also, if you really had this super always correct algorithm, just use it to place short trades or options trades based on what it predicts across the market and sit back and rake in the cash.
You are being cocky because you are dabbling with small money, when you play with big money, your emotions will immediate change and that is when you will make mistakes.
That's precisely why I don't play with big money, not that I have so much anyway. I wonder though, if I was playing with someone else's "big money", if you could keep those emotions in check.
Seems to be the way all hedge funds operate, maybe can even charge membership fees too.
Trader B makes $1m in years 1 and 2. That’s too low to trigger a bonus, but his firm is up $2m.
The system doesn’t reward trader B so he has to choose: do what’s right for the firm, or take big risks in the hope of a bonus
(Simplifying dramatically)
Also, losing client money is just as emotionally difficult and stressful and guilt inducing--maybe more so--than losing your own for anyone with a half normal sense of responsibility and fiduciary duty.
While some trades using this method may not work out, the idea that he must make mistakes simply because he is risking larger amounts is not at all a given. Some people have no sensitivity to such things.
I know a couple of advantage gamblers that sometimes play $10,000+/hand on blackjack, and it might as well be $5 to them - not because they are super wealthy, but because they know they have an advantage, and understand that the math will work out over the long term. Whether they win or lose on a given hand, or wind up winning or losing on a given day, is meaningless to them and they rarely get emotional about it. The same certainly applies to many stock traders.
There are also Black Swan-like events of stock exchanges and entire markets disappearing completely, like it happened in Russia after 1917 and in China after WW2.
If something like the Russian revolution comes along then all bets are off, it pretty much doesn't matter what you did with your money as long as you didn't flaunt it.
I think I could argue both sides pretty convincingly. It is easy to see in hindsight, not so easy in the thick of it.
These obvious moments do happen sometimes. Not always, but they can give an edge to knowledgable people paying attention (most HNers know tech better than the average stock analyst/trader). I remember the night Trump won, the futures market reacted like the world ended. While the world might end at some point in the future, it certainly was not going to end the next day.
With that said, these moments do not happen frequently enough and turn out correctly for the investor to consistently make money.
Buffett in 1988 prior to his net worth increasing a lot.
Or alternately, assuming zero or low enough transaction costs, if these guys just took the opposite position of their customers for each trade (also known as hedging) in the market, then wouldn't the net positions be exactly the same?
Basically, the crime here seems "technical" or some sort of "you lied to me", it's not that people actually got different returns than what their trades entailed.
In a corporation, the owners enjoy limited liability, so should someone actually makes money, they can file for bankruptcy and never have to pay out.
It is a "technical" crime. There are good reasons to regulate ATSs, and the brokers didn't follow those regulations. Instead of prosecuting the brokers here for an obscure crime like "operating an unregistered ATS", the SEC decided to prosecute them for fraud. Judges know what fraud is and as Matt Levine puts it in other articles, "every financial crime is also securities fraud".
Set up a company, sell “shares” in Apple or whatever, and don’t actually buy the shares for your costumers. If Apple falls you make bank, and if Apple rises you declare bankruptcy. Either way the costumers loose.
That is the difference to market makers who actually buy the asserts, so the customers at worst just have a bunch of less valuable stocks not empty hands.
Seems like a really dangerous move it they allowed trading on anything with low volume (options, smaller stocks). All it takes is one trader to notice their order never actually executed on the public market..
Traders are playing with numbers. No one actually expects the paper shares to be mailed after stock purchase.
Brokerage guarantees successful withdrawal event - and if not - then it's a present and clear fraud.
So if brokerage does not actually do anything, but properly updates the numbers on the screen according to security prices and commission schedules + guarantees proper handling of deposit/withdrawals - no one essentially cares?
They'd be in trouble if customer suddenly strikes high margin gold and want to withdraw.
I don't recommend anyone do this, but I've achieved 27% returns trading in my retirement account (the past 12 months as of today). I don't trade random stocks, I don't buy and sell often, and I'm a news junkie so I'm constantly reading the news. If I screw up on a buy, then it turns into a 'buy and hold.'
Lastly, I've worked closely with traders in the past, in a tech capacity. I assure you, they're not all the sophisticated quant geniuses with carefully placed bets that the HN crowd seems to imagine.
(edit: grammar)
[1]: https://www.sec.gov/litigation/litreleases/2017/lr23830.htm
In the summer of 2014, the firm that owned and licensed Platform A discovered Nonko’s training accounts scheme, after a technical inquiry from a Nonko customer revealed that the customer wrongly believed that his training account was a live one. On August 29, 2014, the owner of Platform A sent out an email blast to all Nonko customers alerting them that accounts starting with “TR” were training accounts; the firm then discontinued its relationship with Nonko, accusing Nonko of deceiving its customers.
Meanwhile forex markets are even worse. Leverages there in the past were over a hundred. Which explains why there is so much money to advertise forex. Shady online ad markets are filled with ads offering high leverage online only forex accounts. One can be fairly sure those shady forex accounts are nothing more than bucket shops.
In general leverage is a mistake for most investors. Yet the appeal of hitting high returns with low investment (retail investors using leverage tend to measure return with no relation to risk), mean far too many retail investors are playing with options than is safe.
I set up a demo account a while back, and it's pretty impressive the amount of money you can quickly make (and lose) with CFDs. It was possible on a $30,000 capital to make (or lose) over $1000 per day.
I'm a pretty risk averse guy, and also can't be bothered doing enough market research that short term trading is a sensible idea, so I didn't end up investing any real money.
Maybe there is a typo in your example? Making or losing 3.3% in one day does not seem that impresive...
3.3% daily (if you could consistently make a profit) is a very good return, think about how fast that compounds. Most savings accounts aren't even 3.3% per annum.
Edit: It could be in the ToS. "How can we offer such huge margins? Simple. If our algorithms indicate that you're a loser, we just don't place your trades. But whatever happens, your account will always be credited for gains that you would have earned.".
It's not ok to defraud people or steal from them just because you think they're stupid, either legally or ethnically. This is obvious to most people but apparently not to the finance industry.
> Boiler room guys knew customers were going to lose their money, so they allegedly spent it themselves.
But it was also illegally long.
(I have no idea how any of this works, but I would assume that if they're willing to defraud their own customers they're probably not acting entirely above board on the associated tax paperwork either.)
It doesn't actually matter from a black box standpoint who took their bets as long as they were given the proper outcomes.
It isn't any different from running a casino really, except it has potentially better odds.