Taking Ladbrokes to the cleaners

I always enjoy stories of bookmakers and their 'friends' playing with the markets to try and get a coup over one of the big companies. Yes, the ethics of the whole thing are a bit murky, but there's something that appeals to me about the way they keep their nerves ice cool even when huge sums of money are being thrown about and odds are being recalculated (usually in someone's head - all the best stories are from before computerisation) almost by the second. Of course, it's probably not too much fun to be caught up as a regular punter in the whole thing.

In their article on the life of Glasgow bookie John Banks, who died recently, The Observer details an interesting example:

A story told by one of Banks's racecourse employees of the time, Jim Murphy, sums up that period. As much as (Ladbrokes supremo Cyril) Stein tried, Banks was one step ahead. Stein was using another bookmaker to send money back to the course to affect the market, but Banks worked this out and decided to do something about it. At one Newcastle meeting, a Banks horse, Thika, was down to run. The night before the race, Banks instructed McAllister to ring the suspect bookie first thing in the morning. (Banks' right-hand man David) McAllister was to place a bet of £100 on Thika. If Banks was right about the bookie's links with Ladbrokes, the bookie would be sure to contact Stein to tell him about the bet. Banks was expecting Stein to put two and two together and make five. And he was right.

It was the early stages of betting at the track and Ladbrokes reps were running around the ring backing Thika. One approached Banks himself, asking for £2,000 at 7-2. Banks played coy and laid 7-2 to £50. This made the rep even more certain that Banks was backing his own horse, so he asked for £2,000 at the new price of 3-1. Another £50 was laid. The price was now 5-2. Once again Stein's man went in, asking for '£5,000 to £2,000'. 'It's a bet,' said Banks.

The message came for the Ladbrokes men to put more money on Thika.

'What's the price now?' one asked Banks. 'Three to one,' he replied, and turned his back to face the members' enclosure. The price started to go out to 4-1, then 5-1 and Stein's employees panicked. One of them got on the blower: 'The horse is drifting now, what should we do?'

'Of course it is drifting, Banks must have backed it at starting price. Put more money on,' was the office's response. Thika trailed in down the field. Stein and Ladbrokes had been routed.

I'm curious - do free-marketeers see that as a fair use of the markets for a profit or a fraudulent manipulation? I'm not really sure, but I've had a very long night/day and I need to think about it after I've had some sleep before I'll come to an opinion I can trust.