Premium Charge?

Better to ask how many stars there are in the universe. (IMHO)

You have provided insufficient information to provide an exact figure answer to that question Jay.

Assuming the £1000-£2000 is the weekly gross profit, the applicable premium charge could range from £0 to a maximum of £380. It would depend on numerous factors, the primary one being the commission generated.

The maximum possible premium charge of £380 on a weekly gross profit of £2000 would apply to someone on a 2% commission rate who had no losing markets that week and who is otherwise fully liable to the maximum possible weekly premium charge.

Wins: £2000
Losses: £0
Gross Profit: £2000
Commission Paid: £40 (0.02*2000)
Implied Commission: £0 (0.03*0)
Commission Generated: £20 ((40+0)/2)
Maximum Premium Charge: £380 (0.2*2000-20)
Net Profit: £1580 (2000-380-40)

A customer on a 5% commission rate would pay greater total charges under the same conditions as above but the premium charge element would be lower.


Alternatively, no premium charge may be applicable on a weekly gross profit of £2000. Assume a customer on a 5% commission rate for the example below (implied commission on losing bets is applied at the rate of 3% regardless of a customer's commission rate).

Wins: £10750
Losses: £8750
Gross Profit: £2000
Commission Paid: £537.50 (0.05*10750)
Implied Commission: £262.50 (0.03*8750)
Commission Generated: £400 ((537.50+262.50)/2)
Maximum Premium Charge: £0 (0.2*2000-400)
Net Profit: £1462.50 (2000-0-537.50)

Jay - you will be paying a MINIMUM of 20% according to BF ,but it seems to work out more than this - something called  implied commission ,so in reality it's a minimum of 22%

Oops, coach revealing he doesn't pay premium charge.

Coachbuster,

In the original post Jay specifically asked how much Premium Charge would be paid on a weekly profit of £1000-£2000 (which for convenience I assumed to be gross profit).

Assuming full liability to the weekly premium charge, the minimum possible total charges (commission paid and premium charge) would range from 17.2% to 22.5% of the weekly gross profit depending on the customer's commission rate.

There is no upper limit to the maximum total charges that could in theory be paid on a weekly gross profit of £2000 but the maximum premium charge that could be paid on a weekly gross profit of that amount is £380.

assuming the payer hasn't made over 250K net lifetime profit, in which case it would be far more.

Good point viva.

The posts I made above assume the standard Premium Charge (PC2) and I should have stated that. I neglected to consider the higher rate Premium Charges rates.

ror     23 Apr 12 12:21 
Oops, coach revealing he doesn't pay premium charge.
_________

ror ,if i am or not paying is irrelevant - i am highlighting the confusing way its dealt with ,i still don't understand it - i was under the impression it was 20% minimum but it is actually more than this

Coach,

It's because Betfair take only half the commission you have paid as counting towards commission generated. Therefore, if you are on 5%, and have 100% wins, say, Betfair consider that you have paid 2.5%, which they top up to 20% (or 40/50/60%), meaning that it is theoretically possible to pay 22.5%.

sorry jt i'm a doofous  - i misread his Q entirely and read it as TOTAL charges

Contrarian - yes, i was told this by BF ,but why is only 2.5% awarded and not 5 % ?

Because of the likelihood that your bets have been matched with users on a low commission rate.  I thought it was 3% though?

Coach: It's confusing, yes, but it's actually a maximum of 20%, but very likely much much much less than this. It would only be 20% if you'd never ever had a losing bet, which would suggest someone who never goes into red positions.

You mean losing market then

ror
23 Apr 12 23:29 Joined: 23 Oct 08 | Topic/replies: 4,786 | Blogger: ror's blog
Coach: It's confusing, yes, but it's actually a maximum of 20%, but very likely much much much less than this. It would only be 20% if you'd never ever had a losing bet, which would suggest someone who never goes into red positions.

--------

for a certain style of trading though that's pretty possible. for instance if you specialise in making particular markets, you could be trading to a modest all green book in virtually every market you work.

till the PC came along that was my style.

Indeed Viva, and it's precisely the type of "players" that betfair was targetting PC at.

That's why it's so ironic that so many people who don't actually pay PC curse betfair for it, when it's designed to protect them from the market makers.

I have no problem with the premium charge and fully agree that betfair can charge what they want for their product but please stop bandying about the notion that Betfair introduced the pc to protect customers and help them! That disinformation has long since been blown out of the water, anybody who has studied Betfair's yearly accounts can see exactly why the new charges were introduced...

Undoubtedly the extra revenue was an incentive but I don't think it was the sole reason.

Betfair introduced the PC because it generated lots of profit for them with what they calculated was an acceptable level of risk. All the other "reasons" are just spin, smoke and mirrors.

That's your opinion but there are other potential positive effects of the pc such as encouraging users to "churn" which could improve liquidity.

The churning only worked if you were willing to move into other markets you wouldn't normally have been in catfloppo (i.e. ones you probably had no knowledge of). If you were sticking to your own markets the best way to combat pc was to increase risk by cutting the number of outcomes you bet on (i.e. decrease liquidity). If you were doing the first mentioned the likeliehood is you would just end up paying pc through normal commission. In fact, given my experience on purple, I'd say there's people trying to combat pc by hedging between exchanges and that's increased the liquidity over there, added nothing here and, presumably, resulted in the participants paying less pc's.

Feck having gone through the processes associated with this, I can say that by cutting my activity here sixfold and sticking only to the major events, whilst playing those same events over at purple, I have mantained my interest in betting.  Albiet a reduced interest.  Life moves on.

Feck,

Even in the markets I was already betting in, I have significantly increased my activity as a result of the PC. Before I would only take bets that were at least, let's say, 0.3% away from fair value. Now, I'll take any value at all.

And in sports like football which have lots of sub-markets associated with the main fixture, it is quite easy, and advantageous for PC payers, to move into the ones that we haven't been active in previously.

contrarian are you on 60%?

I'm sure users have had different reactions, Feck. If faced with the of at some point I would, like Contarian be looking for high volume, tight markets with no edge to take positions on.  I guess they lost some liquidity from some users and gained from others.  Now though, all users are profitable for them, even possibly the ones who left completely ;)

If you pay 40% on arrival at PC3 (and BF didn't change the rules again), will you always be on 40%?

hazel,

No, thank God. 40%

Was just wondering if someone could answer a hypothetical question regarding pc?

If someone joined betfair today and won £20 per day (no losses) how long would it be before they were charged the pc?

thank you

I take your point re sub-markets Contrarian (I suppose I could start betting in AvB's and FC's) but betting in markets you were already active in I cannot see how increasing your strike rate could help with commission. At the time it was discussed I even put up an example of how I could pay less by splitting my bets on races between two accounts even though they were pc linked. jt45 confirmed my findings.

hazel, purple isn't remotely as bad as many make out although I'm talking from a gambling viewpoint.

Contrarian at 40% I would be very happy to increase my markets, but at 60% I choose to bet more elsewhere  (its a bit like the 50% income tax argument in the UK). 

Anyway I am not complaining, just moving on in the reality of the situation.

Feck. If faced with the of at some point I would, like Contarian be looking for high volume, tight markets with no edge to take positions on.

It's easier said than done on sports you haven't previously worked catfloppo. If you're breaking even before commission on these new markets then you're really just paying the pc by a different route. There was a lot of bs about churning when pc3 was introduced but nobody seemed to be able to put their logic where their mouth was. If it was that easy and it was what betfair wanted why didn't they show everyone how it's done?

Feck,

Suppose I bet fair value on the toss of a coin all week. At the end of my average week, suppose that I have won 10k and lost 10k. I will pay a total of £200 commission, but I will have £250 (0.02 * 10k + 0.03 * 10k) knocked off my PC bill. So it pays me to bet even at fair value.

I am in full agreement with Feck on thaT, i tried it and all I did was pay commission instead of PC.  Adding to that, in order to make any significant impact i had to churn something like 10 times the amount of money I normally bet.  It was not worth it.

Feck I am a gambler on purple and it proves to be significantly profitable.

hazel,

It all depends on how you're processing your bets. If you're doing everything manually, and especially if it's through the website, then in practical terms what I'm suggesting is impossible. But with some automation, it becomes more realistic. Part of the problem, of course, is having markets that are large enough to sustain a big increase in one's activity. In lots of the markets I'm operating in at the moment, I find that I can't really match any more than I am at the moment, even when I make the market extremely tight.

just.bob the reason I pay 60% here is purely down to me greening/redding every market I played in. I started back in the early days of Betfair, before traders came along, and it was easy to say lay at 110% or back at 90%.  Today I would need a much larger bank to be as succesful as I was back then.  Today purple markets remind me of the early days on Betfair when liquidity was thiner but profits probably easier.

Contrarian I do not use automation although I have experimented with Betangel.  I like to think out every bet I make and I cant seem to get such a complicated thought process into a simple algorithm.  So, I manually use the main website for my bets.

Feck, I must admit I'm talking out of my 4rse a little on this one as I haven't actually tried it but I'd be surprised if I couldn't find some markets that would almost break even that I could stick my bot on and if I could at worst replace pc with commission it would have been worth the effort..  I can certainly see how churning would be pretty inaccessible without automation though.

Suppose I bet fair value on the toss of a coin all week. At the end of my average week, suppose that I have won 10k and lost 10k. I will pay a total of £200 commission, but I will have £250 (0.02 * 10k + 0.03 * 10k) knocked off my PC bill. So it pays me to bet even at fair value.

I don't see anything wrong with that contrarian although if you know nothing about the market you'll probably lose more like 10,020 because of the spread. It would probably get worse the higher your stakes went suggesting you'd only be interested in adding liquidity to high liquidity markets that didn't particularly need it. From that point of view and the fact that the majority of pc payers were on nearer 5% and would need to be churning larger amounts (and so be automated) I'm far from convinced catflappo's premise that the pc added liquidity is true.

I'm far from sure too Feck although I suspect it's made little difference. My point was that there were reasons behind its implementation other than just the money generated from the charge itself.

Magician did some figures a while back, I wonder if he's  looking in?

Dave asked: If you pay 40% on arrival at PC3 (and BF didn't change the rules again), will you always be on 40%?

Does anyone know the answer to this, or if you arrive at 60%, can you move down over time to 50%/40%?

It is possible that your lifetime commission generated to gross profits ratio will change to the extent that your applicable Premium Charge rate will require adjustment. Should your rate change, we will recalculate as if you had always incurred the Premium Charge at the new rate. If your rate has decreased (eg if your lifetime commission generated to gross profits ratio increases from 4.9% to 5.1% - moving you from a 60% rate to 50% rate), the Premium Charges you ‘overpaid’ when being charged the higher rate previously will be used to offset future Premium Charges. If your rate has increased, Betfair will notify you directly and give you at least two weeks’ notice before the increased rate takes effect. You are entitled to seek review of your Premium Charge rate at any time.

In summary, you can be moved between PC rates.