Horse Race Betting in the 21^st Century: Some Out-Of-The-Box Thinking
Thursday, March 10, 2005
9:10 a.m. - 10:00 a.m.

Mr. McErlean: Our next speaker is Lee Amaitis. Lee has an impressive array of titles and hopefully I will not take the whole morning explaining them. He is Executive Managing Director of Cantor Fitzgerald, L.P., Chairman and CEO of BGC Partners, Vice Chairman of eSpeed, and President of Cantor Index and Cantor Gaming and Wagering. Lee is responsible for all of Cantor’s gaming operations. His background, though, is not necessarily on Wall Street but on the backstretch. He was Brooklyn born, started as a hot walker, then rose up to a groom, outrider, then eventually a trainer and a racing official in New York and Pennsylvania. In 1977, he did go to Wall Street, and has had an impressive 28-year career in the financial industry. In 1995, he joined Cantor Fitzgerald as a senior managing director and took over eSpeed, which quickly transformed the way the US Treasury market is traded. Lee also played a key role after the September 11 tragedy in building Cantor Fitzgerald basically from the ground up once again. Lee is based in England and he oversees Cantor Index, Cantor Sports, Cantor Odds, SpreadFair, and soon to be announced, a new online casino. Through it all, Lee has maintained his interest and passion in horse racing. He is an owner and, most of all, fan of horse racing, and I am happy to say that when he does get a chance to come over to the US, he is a regular at the Meadowlands, and we thank him for that. Lee is, as you can see, joining us via teleconference from London, England, due to a last minute family issue, but we are glad to have him here, and for an HTA/TRA first on the video conference. Lee, on behalf of everyone here, we want to welcome you. Lee Amaitis.

Mr. Amaitis: Thank you very much, Chris. That is a very warm welcome. Thank you. I want to actually express my pleasure in being invited to address such a prestigious group. I really apologize for not being there in person. As Chris mentioned, there is a family matter. The family matter is actually a very good one. I am minutes away from having my second child, and I was unable to travel such a distance to be able to be away from the birth of our second child, so we chose to try to do this by video. I hope it all works out for everybody there, and thank you again for having me.

          What I want to talk about today is actually Cantor Fitzgerald and its role in horse racing and then bring in some things that we have observed over the years, as being a fan, as being an owner, as being people involved in racing for a very long heritage of years in the game, so to speak. The agenda today will be just the overview of Cantor Fitzgerald, something about our technology, and then we will switch to things involving racing, such as betting exchanges, pari-mutuel wagering, and then my brief conclusion.

          The Cantor Fitzgerald companies are represented on this slide here. The group that spun off here is eSpeed, at the top, which is a technology company that owns and operates the world’s largest global network for financial transactions. Cantor Mobile, Cantor Sport, Cantor Index, Cantor G&W, BGC, are all spin-off companies or affiliate companies of the parent of Cantor Fitzgerald, all of which are involved in either financial transactions or some sort of wagering business. G&W is a gaming and wagering affiliate, and the Cantor partnership supports all of these companies. There are many other companies in the family tree, but these are the ones that I would like to address today.

          As a global financial services firm, we have been in business for over 55 years. We are very deep in terms of knowledge about how things trade, how one wants to handle transactions, way back from a half of a century ago. Bernie Cantor was considered to be a genius in his field. He was the first to introduce transparency into the marketplace, where people could actually see where things were priced, and for that made a very deep mark into the way things have evolved to trade from where we are today. The company itself has invested over $250 million in developing electronic trading technology. 

          A little bit about the businesses is that if people are familiar with how commodities or futures trade, where people are around huge pits and yelling at each other and screaming prices at each other and concluding trades, if you imagine that, then the inter-dealer broker world, where Cantor is heavily involved, imagine that same thing up in an office where people are sitting amongst desks and yelling and shouting over telephones, and closing transactions in the hundreds of millions of dollars. As time evolves, of course, transparency is needed for these products of speed, resilience, expansion, things moving much faster with the growth of the financial markets, so we invested our money in electronic trading, which made it easy to produce to the client a process that allows him to execute faster and less expensive. The people part of the business has then moved on into producing new products, which then becomes a pipeline for new transactional services over the electronic network. ESpeed, as a company handles, $43 trillion worth of transactional business a year. Now that is the network that I alluded to before. It is installed and deployed behind the firewalls, which is an important aspect here, in over 850 institutions around the world. It is a cash-rich company. It has a couple of hundred million dollars in its pockets right now. It is profitable and it is one of the most exciting things that has come around in financial trading in the last 3-4 years. 

          BGC is a business that Chris alluded to that I was the chairman of. That is a brand-new business that was spun-off from Cantor Fitzgerald. Those of you who may remember that Cantor was the company that sustained the most losses on September 11, and it literally wiped out all of our voice brokerage business in the United States operating out of New York. We waited a number of years before we were actually going to get into that business. We have spun off a company called BGC, which is named in honor if Bernie Cantor, and basically we now have added hundreds of new people to the organization, growing rapidly in Asia and in the US. BGC uses the eSpeed technology to deliver its prices to its clients and it also allows its clients to interact on that technology, so if they wanted to trade electronically with us or pick up a phone and call one of our brokers, then they could complete one of their transactions. 

          Here in England, when I arrived in 1995, actually to take over the company’s operations in the European zones, it was fascinating to me that always in Europe, or in the United Kingdom, bookmaking is legal. I always believed that if we were servicing a trader from Merrill Lynch and a trader from Deutch Bank, which is how our business operates, if we are talking to one person on a telephone that is closing a $100 million bond transaction with us, and at the same time, when they put down that telephone, they call their friendly bookmaker and want to make a wager on the fourth race at Cheltnam, I felt that, why wouldn’t we service them in both industries, so we started a business called Cantor Index, which is a spread betting business. It is really the world’s first time online financial spread betting business. What it does is it makes prices in all financial instruments where people can bet on the movement of stocks, bonds, currencies, in an instant. It operates a business which is a contract for differences. I will not get into the too technical details of this stuff, but it really is a matter of it allows people to wager on things that move, whether it be a horse, whether it be a stock price, a bond price, or a currency, or whether it be a sporting event. Cantor Sport is the affiliate business which handles all of the racing and sporting wagering. 

          The interest of Cantor Sport is involved in racing in a very heavy way. I guess you can see from the slide here that we are a major sponsor of UK racing. I could say that we are probably one of the top ten brands in UK racing. We are a sponsor of a group I race at the Sussex Stakes. We have sponsored well over 70 races per year. We run a meet at Epcott every year for the hurdle horses and steeple chase horses. It has been a phenomenal success for us to be involved in racing from the sport’s wagering side. 

          Just last year, we decided that, with the technology that we have invested in, and our relationship with eSpeed, and the fact that we actually learned how to handle transactional business in the way that I expected it would go in terms of the index and the sports wagering, we decided to use our technology in terms of gaming. What we have done is formed an affiliate company called Cantor Gaming and Wagering which is licensed in Albany, which is the premier jurisdiction for online gaming, and that will be launching casino games and other games of note on the Internet as well as on private networks that will be operated by eSpeed. We have, in the pipeline, active pursuit of things in the United States, but I think that everyone in that room is aware that online wagering in the US for casino games is taboo, although there are a lot of people that do it. We, being a US based firm, and heavily involved in financial services and regulated by every regulator in the world to the US in betting products. All of that is launched out of the UK, and does not take US bets. 

          We launched Cantor Mobile in September of 2003. This is an interesting product. It is a mobile device, which is a PDA or an XDA, however you choose to say it. It is backed by patented technology that actually streams data. Now, in and of itself it does not sound that exciting, but when you think about mobile devices on how transactions take place it does. If you are in the mobile phone world, or these XDA devices, and you want to make a wager or buy stock or make a bet on a financial instrument or trade on an online trading platform, all of those things are not done in real time. They are actually done with a quote provided by the service provider, and then you would indicate your preference, and then that service provider would come back and tell you whether or not that transaction could or could not be done based on the changes of prices because that data is slow. It is not streaming, it is slow. What Cantor Mobile has done is it has perfected streaming data to where you have real time transactions. So, as fast as it hits the tape, that is as fast as you can take it, or buy it or sell it, so to speak, on our transactional devices. When we launched it, it was seen as a very exciting area in the wagering world, not so much in the financial trading world, but in the wagering world, and that is actually the first place where we launched it. Twenty percent of our Index clientele wager with us through these mobile devices.

          I want to move along a little bit to technology. I want to get into the pari-mutuel world in the United States. Now, here in England, pari-mutuel wagering is actually very fledgling. It does not exist in the concept that we know in the US. I mean, this is a bookmaker society. This is a betting exchange society. There is a tote, albeit the tote is represented at all of the race meets, it is not the choice of the punter, so to speak. So pari-mutuel wagering in the UK is a far different animal than it is in the US. In the US, obviously, pari-mutuel wagering is the foundation for betting. I think what has happened in today’s world, though, is it has become outdated from its technology. You have things such as these patchwork systems that have become insufficient. Wagering has increased. Outdated frame relay technology that does not allow transactions to move fast enough has been an issue. The delay in data transfer has been significant in the criticism of bettors in the sport today to not understand why if a horse is 5/2 at the off, and when he is past the 3/8 pole, he now becomes 8/5 because of the very slow transaction process because of outdated technology. In my opinion, it is a critical time for racing to update itself. Racing faces some serious issues in the US. Fans are not supporting the sport. You don’t have new fans. It is all about teaching people what racing is all about. I understand that the racing game has undergone a transition in gaming, adding slot machines to racecourses and doing the things that are necessary to raise handle. I am sure that the horsemen have benefited from a lot of that going on, but the sport itself, in my opinion, is suffering somewhat. I think the sport itself is lacking the initiative it had from years ago. Not too long ago I was in the US and spent a day at probably one of my favorite racetracks in the world, not the Meadowlands, Chris, but Santa Anita, I am sorry, and I would say to you that it was different from what I remember in the ‘70’s. I think that although racetrack owners and operators are actually put into a very difficult position in being able to operate these racetracks, the fans need to get more involved. We need new things to push people into the racing world. You have to have them excited about coming to the races. I think it is about integrity. I think it is about speed of data. I think it is about more information, transparency. I mean, it is the first time in 11 years that racing has declined in betting handle. That is a tragedy. There is some good news, though. The elimination of the foreign withholding tax should be able to increase the handle. US racing is the perfect nighttime sport for UK bettors. The simulcasting of races into the UK is obviously a big event and people are very much interested in it. I know I spend half of the night watching racing from the Meadowlands, when I can, on the Internet. I am fascinated by the amount of people that I meet on the street and through business that are US racing fans. The part that needs to be focused on is it is about communication, and I think it is about networks. I pointed out to you that I think the pari-mutuel network system is not flawed but it is fractured. It needs to be fixed. 

          In our world, we operate real time global communications. What I mean by real time, I mean that when you push a button on eSpeed to make a transaction, it is 300 milliseconds confirmation, whether you are in Tokyo, or whether you are in Australia, or whether you are sitting in the United States, or whether you are on an Internet site patched into our network in Palm Springs. If you want to buy a US Treasury security, you are going to get a confirmation in 300 milliseconds. That is serious speed in transactional business. Nobody would even consider getting into the transaction world without sub-second in terms of turnover, and we have beaten it by coming into the 300 millisecond range. It is a serious network. It is concurrent, it is redundant. Although this is tragic to say, on September 11, the main system, which was at the top of the World Trade Center on the 103^rd floor, when the building fell we lost those communications, but the eSpeed transactional system never stopped trading. It immediately switched over to its redundant site in London, and we had a backup site in New Jersey. So, we do know about transactional business. It is one of the things that we have spent a lot of time and a lot of money on. We have invested $250 million in the beginning of Cantor and we added another $150 million worth of eSpeed investment, so total investment for technology is $400 million. At peak times, when the US financial markets are trading at the hottest time, when a number comes out or when you get financial data that makes markets spike up and down, we are still only using 15 percent of our network. 

It is global. It reaches across the world. What I like to say about this is, eSpeed is where it happens, when it happens. We can cover it. 

If you try to combine the two into a pari-mutuel solution, we believe that eSpeed’s pari-mutuel solution should be one network, one backend, with many front ends, where you would leverage an existing network that has already been built, a network that has been tried, proved, resiliency, redundancy, and basically is secure and cannot be hacked into. It is secure. It is one of the most secure networks in the entire world. We pay people all the time to try to break into us and nobody has ever been able to do it yet. We have spent a lot of money in it. For someone to build it along side of us would be too expensive, far too expensive to do it. The way to move transactional business is to use something that is already in the frame or that is already working. Then if you can connect your tote calculation functions, the things that you are operating on too many platforms, where it is slowing down your data transfer, if you can connect them to one central point, where everybody comes into that one central point and then distributes out through the speedy network, you are going to solve all of your latency problems. You are going to solve everything that is going on in this integrity of data moving. 

The other part of that is that then you get into the competitive mode of front-end systems. Now front-end systems could be delivered by anybody. It is the customer’s preference. Our preference in terms of front-end systems is actually investing heavily into mobile devices. We think that mobile is the way of the future. We think that wireless is going to control a significant amount of transactional business in the world in the future. 

We operate a real time network, reliable, secure executions. A very big point of this is that we look at a $100 million bond trade the same as we look at a $10 bet to win on a horse. It is the same transaction. It takes the same energy. It takes the same time. If someone goes to a teller’s window and places a $10 bet, someone had to press a button, that data has to be transferred in sub-second time back to its relays, back through its simulcasting partners, and back out to the fans so they can see that the prices have changed in real time. We look at it as the same prospect. When we started building eSpeed, and when we started going through all the ways that we could use it, it was like a hammer that hit us in the head that we should be using this for a number of different initiatives in the world today. Me being a passionate fan of racing and then spending a lot of time with Joe Asher, who told me about the issues in the US, I said we should probably get involved in seeing how we could fix the network and we think we have some solutions for that. 

There has been a lot of talk about betting exchanges in the world today. Betting exchanges are an interesting model. As I said before, the UK business is based upon bookmaking and betting exchanges. The tote business is minor, has very little turnover. Betting exchanges have been the talk of the town. I think if you make the comparison again back to US-UK, 80 percent of the business that is done in the US is done on exotic betting. You have an $18 billion turnover, and 80 percent is done in exactas, trifectas, superfectas, whatever. I think where exchanges have picked up their momentum is fundamentally in the UK, you have people that bet win, place, and show. The ability to lay win, place, and show on an exchange has created a new force of player. It has made the pro come back into the game and say, “Okay, I can lay against horses, so therefore I will use betting exchanges.” It has caused some transparency. It has caused tighter pricing. It has been considered, overall, though controversial, a huge success in the betting world. 

One of the things that I think is the challenge, and although I am not sure if the challenge can ever be met, is that on betting exchanges when you have the simplicity of win, place, and show, the permutations are not that hard to compute. If you are going to have a layer try to lay trifectas or exactas, the permutations on an exchange are going to be literally impossible. I don’t know of anybody that would lay trifectas or exactas on exchanges where I would be saying, “Okay, I will take a dollar bet and I could lose ten grand.” I am not sure I would be in the process of doing that. That lends far more to a pari-mutuel platform. That is why it has been so successful in the US in pari-mutuels, whereas in this country, exotic betting is a very small part of the overall turnover. 

There are examples of exchanges. One is BetFair that people have known about. One that has probably not been heard about as much is SpreadFair. That is Cantor. We started SpreadFair. It is a betting exchange for spread betting. It is basically built on the same premise as buying and selling products. One thing I can say about Cantor Fitzgerald which is part of this is that we, over the course of 55 years, have operated the world’s largest over-the-counter exchange. That is what we do. We buy and sell from individuals or banks or institutions or anybody that wants to make a price, and we sell the transaction in our name. In theory, it does not matter if it is a bet, a buy or sell of a bond, a transaction such as a contract of difference where you are going to bet on something that happens in the future, Cantor has been able to handle all of those transactions.

There are a couple of issues with exchanges. One is that a lot of people see that the exchange model is seen as threatening for the funding of racing. There is really no evidence either way to say whether it is or it isn’t. Others regard exchange activity as generating incremental funding revenues. That is probably true in some respects because it has brought new players into the game. There is an integrity issue. When you allow people to bet on horses to lose, my response to that is, when you look at integrity overall, you would have to say that when there is money involved and when there is a network of people involved, you are always going to have something that is going to have an integrity issue. I think you were talking about it before, I came in late, but I think it was on the medication issues in racing. Cheaters are cheaters, and cheaters will always be around in our society. It is up to us to actually find the cheaters and remove them from the game. I am not sure that saying exchanges allow people to cheat easier is a true or accurate statement. 

I think that on the funding side of it, though, if you look at it, bookmakers and the tote pay money to support racing. That is a given. That is no doubt. Bookmakers pay ten percent of their gross profits here. In 2003 and 2004, the contributions were somewhere near 12 million pounds. The criticisms of exchanges are that exchanges pay ten percent of their commission revenue, not their gross profits. What that means is that the British Horse Racing Board has done a survey that says that the amount that exchanges pay is not enough because the contribution per pound or dollar is less than one half of what a bookmaker pays in terms of levy, and in some cases they have indicated that can go down to as much as one-third. The controversy is that racing is not getting enough money and bookmakers are contributing a much higher number. What people have considered to make it fair is to raise it. We launched SpreadFair in June of 2004. We took the conscious decision to not have horse racing on SpreadFair. It was too controversial at the time. There was this integrity of racing on it. There was a number of things. We made a decision, even though we knew it was going to cost us a lot of money not to have racing on it, we made a decision that we would not get into the mix of the controversy that was going on. We spent the next six months negotiating with British Horse Racing Board and then came to a compromise with them, then we launched racing on our exchange after agreeing to funding the range group with the BHB. 

When you go to things like integrity, exchanges allow people to bet or lay. I think that it doesn’t really matter, I guess, if you are betting a horse to win, you are actually betting on everybody else to lose, which is probably the opposite side of the argument to say, why can’t I just lay one horse to lose? In that sense, the integrity issue is a matter of opinion. Is there potential for scandals? I think there are potentials for scandals every time you have some sort of event that people can bet on. Of course there is. There is always potential for scandals, but it is not exchange specific. It is industry. 

The one thing that exchanges do bring to transactional business is, if done properly, there is an audit trail, which is what we call a “key stroke log.” A key stroke log is that, on the Cantor Fitzgerald systems operated by eSpeed, every time there is a price change, every time somebody types a change or takes a transaction, we log thousands of key stroke logs. Every time someone places a wager or uses our online systems to do anything, we have a log of that keystroke. That is saved in a server for regulators to come back and take a look at, and any time they want to view disputes, they can. If someone said, “I bought it first,” we can go back to that log and say, “No you didn’t. Here is the transaction that beat you.” We can show them the keystroke log. That is important in racing because what happens is that it brings the integrity issue down to the point of saying you can know what is going on at all times. You can see what is going on at all times in real time. If operated correctly, exchanges can actually be very beneficial in terms of data. 

The other thing that I want to touch on in terms of racing in general, and I will say this in the UK, fixed odds betting and bookmaking….(transmission error)

Sorry about that. Bookmaker turnover in the UK—32 billion pounds last year. Now that includes sports and what they call fixed odds betting terminals, which are nothing but random number game generators. It is a roulette wheel that randomly picks a number for roulette. 12 billion of the 32 billion is attributed to fixed odds betting turnover. Within the remaining 20 billion, the one thing we do know is that racing is declining. It is not increasing, it is declining. Another serious issue for racing globally, overall turnover in racing is declining, which is something that one really has to take a look at to keep the sport going. 

          There are just a couple of quotes here on the integrity of exchange. I will not read them to you. They are pretty straightforward. Peter Jones, the chairman at Tote has just expressed his interest to say they are here to stay and the integrity issue is just let’s get on with it and let it be a benefit to racing. Christopher Foster has pointed out the fact that I brought out about being able to keep audit trails and thinks that is actually a very good thing, which I don’t disagree with. 

I have an opinion about the North American betting exchange model. I think it should be owned by the industry. I think that racing needs to own it. It is your sport. It is your business. It is the owners, the racetrack operators, the people that spend their time, their money, and their investment to put the show on. They should own the industry. They should own the exchange if they intend to build one. I think that if there is a betting exchange opportunity in the US, it should be done similar to the way things are done in the financial world, which are called consortia. All the owners get together and they own the business. We did something similar in Canada where all the Canadian banks got together and built the electronic trading platform over our technology, and they all owned it in tandem, and we operated it for them. So they control it, they govern it, they determine the pricing, they determine the levies on it, they determine everything about it. We are the operator and we get paid a percentage of operational turnover. We think that if racing is going to adopt an exchange, you should own it, you should have a professional operate it, you need to have the integrity of great networks, you need to have the resiliency, the redundancy, the scale to make it large. I think you need to communicate it along the same network pattern as you do your pari-mutuels so that people are informed of your transparency, so they are one and the same. 

Pari-mutuel wagering should be invested in more heavily, bringing new things to it, which I will go into. There should be new bets, new incentives for people to bet and bring people to the racing industry. There needs to be things to make people interested in going to the track again. There are no new bets in racing other than spin-offs of old bets. The pick six becomes the pick five, or a pick three becomes a pick four. It is not bad, it is just not new and exciting. Compared to Las Vegas, if you look at Las Vegas they are spending billions of dollars building new casinos. The average slot machine life is one year and then they throw it off the floor. Twenty percent of all gaming space is for new things, so comparing in the wagering world, you have to be fresh, new, and exciting. New bets have been invented. We have been part of them, and we are very proud of it. We have a long line of things that we have. Part of my hobby time is to think about new ways of how to bet on horses. I think in many different terms as being a fan and someone that likes to gamble. I try to figure out ways how I could actually be more excited about placing my wager. We invented a new bet. It is called the Choose Six. It is going to be rolled out at Delaware Park on Delaware Handicap Day. We have been working very closely with Bill Fasy. We think that he has been very helpful and instrumental in this new product. We are excited about it. We have a joint venture with Scientific Games, who are going to supply the actual integration into the racetracks. The Choose Six is actually a variation, again, not necessarily that exciting, but a variation of the Pick Six, but it allows you to re-enter the pool, re-purchase your ticket as long as there are six remaining events and you get to pick the events that you want to bet on. There is more information about that in your packs there today and I will not go down through a lot of time explaining it. One of the other bets that I think is actually quite exciting is called the Group Bet. The Group Bet deals with the fact that you could actually oppose the morning line favorite. You could bet in two groups. You could bet on a group that is the probably contenders to the morning line favorite or the long shots. It groups the horses together so that if you absolutely hate the favorite that day, and you are really frustrated because you can’t pick a horse to beat the favorite, so you are going to lay off the race, we want people to bet. So we came up with a way to actually have them bet on the race by saying to just pick a group and the performance of the group will be against the morning line favorite. It is exciting. We have actually tested a lot of this stuff on traditional gamblers. Professionals are probably more inclined to say the Choose Six is more exciting, the Group Bet is not. People that are somewhat new to the game are really excited about the Group Bet because it makes handicapping very easy for them. It gives them three choices. They can bet on the favorite, group a or group b. It gives them some exciting thing to do, so they have a one-in-three chance of cashing a ticket, which is actually new for racing. 

In concluding, I think that racing really needs to have a serious investment in best of breed technology. I think racing needs to have a good partner. I think racing needs to embrace things that are new and exciting. I think that racing needs to control its destiny. The owners and operators of racetracks, the breeders, the people that actually spend the time and the effort to put on the show need to be involved in owning and operating things that are involved in the wagering around horse racing so that they can benefit and racing and funding could actually increase.

I thank you for listening to me today. I am excited about being able to talk to you about it. I am very passionate about the things that Cantor does and we are very excited about being involved in new initiatives in the horse racing business in the US. Thank you again.

Mr. McErlean: I think we have a couple of minutes. If anybody has any questions for Lee you can do them at the microphone here.

Joe Hill, Roberts Communications: Technology—a couple of quick comments. I will stay away from the racing game for a minute. I am substantially disappointed in Cantor’s assessment of our technology and the lack of accuracy in what they have come up with. I am not sure who the consultant is that pulled the information for you, but that is seriously flawed. The pari-mutuel networks that exist today, and I will speak for my competitor and this will be the only time I will do this, but we communicate in sub-second fashion in the communications world. The transaction processing, which is beyond a communications network, may be flawed, may be slightly slow in the protocol world, but I think it is very important, for most of this room are customers of Scientific Games, Roberts Communications, the people that have invested millions of dollars in this industry not to bring the wrong technology. We do this for a living. We are not insufficient in that arena. We build the right technology. As a matter of fact, frame relay is the most widely used North American technology for IP communications because it is not unpredictable and it is sub-second fashion. So I would challenge Cantor in that respect. I am not sure what type of technology they use, he really did not touch on that, other than what their value adds that they are looking to sell to the industry. I would check your information and maybe dig a little deeper. When you bring comments like this to an industry that is constantly being challenged with new technology, the first thing one of our clients will do is run with it and say, oh my goodness, you are using the wrong technology and that is not the case at all. The tote delays, the delays in posting are purely based on display information, not the data transfers that the IP networks run on. Like I said, we are sub-hundred-milliseconds. I would challenge you to give me an IP based VPN that will deliver data in that fashion, especially in this environment. The most demanding real time transaction processing environment in the world is in the pari-mutuel industry, bar none. It is the most demanding. Instant satisfaction is what they want, and that is what the transaction processing vendors are faced with and that is what the communication vendors are faced with. I would ask Cantor to go back and do a little more homework before they come into our industry and say, “Here it is. Here is how we are going to fix it.” We faced that with IBM a few years ago, four or five years ago, and they walked away with their tail between their legs and said, “Oh, it is too expensive, or we are going to give it a shot, but it is going to cost you $40 million to $50 million in R and D,” and that is an easy way out. The fact is that we have an awful lot of time and money invested into this industry and we are not investing millions of dollars annually to do it wrong. We invest a lot of money to do it right.

Mr. Amaitis: Well, I thank you for your comments. I can only share with the group what the industry has been concerned with. I think the latency issues of transfer are clearly there. People are concerned about it all the time. I have addressed fan groups in the US and have seen that brought to attention many, many times in terms of them saying that prices change too slow. Now, I am not criticizing your operation at all, sir, what I am saying is that I think overall the application of how wagering is done in the pari-mutuel system in the US needs a very good look at. I am not saying there is anything wrong with your technology or Scientific Games for that matter. Scientific Games is actually a partner of ours. I would not be so quick to criticize one of my partners, but I would say to you that I think that is part of what is looked at in the industry as a problem and I am not trying to sell my company here either. I am just telling you that I think that in the latency issues in racing, you probably operate too many hubs. I think that the industry is looking at consolidating hubs. I think the industry is looking at better ways to move its data and I am certainly not putting any criticism on how your operation works at all. 

Mr. Hill: That is a very good point and very contradictory to what the slides say. That is why the back half of your presentation, which was substantially accurate on maybe the way that we hub and store forward information, but the beginning of your presentation was that the technology that the industry has chosen is antiquated. Again it is not just me, it is my competitor as well, we have chosen the same type of technology, it is the most widely used and most efficient in the IP world and the data transfer rates are accurate. So, when we put an industry forum together and we bring this type of information, it needs to be accurate. If we are going to try and drive the industry in another direction for technology, then the information that you bring to the group has to be accurate, and the beginning part of your presentation was substantially inaccurate. You may be accurate in saying that the hubbing concept is not the right way to go, or maybe there are too many hubs. You might be right. I am not in the transaction processing world, but I am in the data delivery world and I can guarantee you that we deliver in sub-second fashion, as you said your industry does. Thank you.

Mr. Amaitis: Thank you. We are in the transaction engine world and we do know how transactions work. I do think, again not criticizing you or Scientific Games, what I have observed from the industry based upon the fact that people need to have faster data. How it is delivered to them and how many loops it has to go through may be the problem. Maybe it is the problem of how many hubs it has to travel to before it gets back from one simulcast spot to another to the actual racetrack. Again, no criticism to your business, sir, all I am saying is that I think racing needs to take a very hard look at what is happening in data transfer. 

Christian Helmers, BetFair: I am director of business development for BetFair. How many people have heard of BetFair? I just wanted to get a show of hands from everyone here that knows of BetFair and betting exchanges. How many people know of E-Horse? Four or five? How many know of IbetX? One or two? I think that Lee did a fantastic job of summarizing the value points of a betting exchange, but ultimately there is a piece that is left out of this equation here, which is the off shore pirates. What are you guys going to do? Today, BetFair has openly come to that table and said that we will compensate US racing, whereas there are other exchanges that will continue to operate and will never pay a cent. Today the liquidity on BetFair is approximately $75,000 to $125,000 per US race. That is on accepting wagers from UK customers, not US customers. E-Horse, IbetX, they have about $5,000-$10,000 per US race and they are accepting bets from US customers. So the real question here is not really about technology. Everybody has technology. I mean, our technology, we are one of the largest databases in Oracle. We have over 400,000 people. We have 85 percent market share. Technology is technology. You guys have, I am sure, fantastic technology too. It is about strategy. How much longer can US racing wait until they are never going to be able to recapture money from betting exchanges that are located offshore? At what time will people step up and say we need to do something today? Now, logistically speaking, a betting exchange could be owned by the industry. That is fine. How long do you think that is going to take to operate? What are the logistics? The US market is very fragmented, and I think based on the states and the different statutes and how this would work, I just want people to think, and maybe Lee could speak on this too, is how particularly US racetrack operators should start thinking about what they are going to do today and how much time they have in this decision. Thanks. 

Mr. Amaitis: I am not sure if you want me to comment on that or not, but I would say that I think the racing industry needs to take hold of its destiny and own and operate it itself, with good partners.

Doug Reed, University of Arizona: Just a quick question on the other part of your presentation about wagers. You have a variation on a Pick Six and a variation on Odds ands Evens. Do you have any other wagers that would be dramatically different than any current wagers? If so, maybe what or when are things in the pipeline? 

Mr. Amaitis: Right now the Choose Six is the one that we are actively bringing to the marketplace. It has been, again, approved by the Delaware Race Commission. The Group Bet has also has its approval to be introduced, although it is not going to be introduced at the same time as the Choose Six. We have a number of variations of different types of bets. I am not going to get into it all with you. I could bore you with details about how we think people could wager on horses, but I can tell you that intellectual properties is one of our strongest suits, and we have quite a number of people that invest 110 percent of their time just thinking of different ways to wager. You can expect to look for us in the future in terms of exciting new things.

Mr. McErlean: Lee, thank you very much. We appreciate you taking time out and we wish you the best of luck with your new addition, hopefully soon.

Mr. Amaitis: Thank you very much.