i am sympathetic towards the idea of the PC (i should add that i was paying in its first inception, in its second inception and will be on a higher rate in 13 days time). i acknowledge that there are running costs associated with the support and development of the exchange and if they are not being met, then the pricing needs adjustment. i'm not so sure about funding the development of an exchange. is not taking winners money and then investing it in their own business? the winners don't get to approve the spending of their money nor do they see the return.

if you are investigating the strategies of the 480, i suspect you'll uncover a lot of in-play "trading", i.e. derivative bets, and a lot of people closer to the action than the delays.

you'll also discover some people who are good at pricing stuff up.

i've already touched on the fact that the pricing is inequal across betfair's customers because of derivative bets and the hoovering has been done to death.(betfair will now be in bed with the courtsiders, why spend money trying to provide a technological solution now?)

the idea you put forward is simplistic, but, in principle, sound IF they reflect the true costs of repaying the development of the exchange and continuing to run it.

it should, however, have always been about investigating the nature of the 480 winning accounts and addressing pricing advantages in those accounts, rather than the shotgun approach they've taken.

DStyle, I agree entirely. They tried to make something out of varying the market base rate (upping it to 7% in frame betting a few years back) but got shot down and didn't persist w/ this.

Obviously an approach targeting in a differentiated way at IR wd better than the land grab they're proposing now.

This placing of derivative bets is a commission minimising strategy, right?

This is something I hadn't thought of as I can't price up those markets anyway (the frames) and the horse win / place markets don't work that way.

FINE AS FROG HAIR
Date Joined: 12 Mar 07
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When: 04 Jul 11 19:48
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OK I'll set myself up to be shot down.
But this is basically how I see it very simplistically.
Let's have an extreme hypothetical scenario.
An exchange is set up.
The founders model that they 5 % per completed transaction to amortise the start up costs and make a reasonable profit.
The 5% to be deducted from the person who wins each transaction.
So they start off with only 2 customers, who each put in 100 units of capital and then proceed to play 100 games at even chance odds.
Now the founders would have reasonably expected that the two players would win approx 50 % of the time each, so at the end of 100 games, they would both be down to 97.50 units of capital,and the founders would have received their 5 units in commission.
Then the players would start another round of 100 bets, and at the end would each be down to 95 units in capital and the founders would have now received 10 units in commission.
And so on and so on, till both the cutomers run out of money and the founders have received a total of 200 units of commission.
In the meantime they can spend part of this 200 units to find two more new customers to put in 100 units each, and start the whole thing all over again.
However, lets assume that for some reason or other, totally unforeseen by the founders, one of the players wins all the bets from day one. He has found a magic formula or bot or whatever.
So at the end of 100 bets, you have the the totally different scenario of one customer having 195 units of capital, the other customer zero, and the founders with only 5 units in commission.
If the successful player then decides to withdraw all his profits of 95 units, you are left with a defunct exchange.
That is only one customer with 100 units of capital in the exchane and the founders with only 5 units of commission, not enough to attract any new customers to replace the bankrupt one.
That is, the extreme, unexpected success of one customer has totally thrown the exchange business model out of total whack.
What to do ?
The only thing is to penalize the extremely successful customer for his extreme success, and spend the money on trying to get another customer for him to play against, or close down the exchange isn't it ?
There is really no other option.
As I said above, take your shots.
I'm prepared to be totally wrong on all this and to learn why.


The only thing wrong with this is that it is almost inconceivable than a betting exchange founder would not realize from day one that this would happen. In any field of gambling (or any field of human endeavour for that matter) a small elite will take a disproportionately large slice of the pie.

Betfair themselves are the most elite of all of these. If it was true that Betfair was really using this money to get more customers, then everyone paying the charge would benefit. I don't believe this to be true.

If we can point to the money being used for anything, it has to be all the arcade and miscellaneous nonsense that has been created to redirect funds away from the exchange rather than improving it as Betfair gets very high margins for this kind of activity.

Considering that they've all been notified by email or phone, the 480 aren't saying much.

Why don't they lower the commission, and have a per bet basis?  2% base commission on any initial market bet, .5% for any future bet with the same entry (1st back bet 2%, 2nd .5%, 1st lay bet 2%, etc etc).  Could still have the reduction factors, whatever. 
This is more attractive to the straight punter, and more taxing on the trader.  Lets be honest, most of the "480" would be trading markets and green the majority of the time, paying 5% or so in generated commission.  These are the ones that will have the close to 60% charges as they aren't generating commission.

To generate any decent money, you need the big markets with lots of events.  I would suggest that people worried about courtsiders, are using that term because a court is optimmal trading venue, as on the court, lots of things happen.  Soccer, very few game changing events will occur, Tennis however, you have 1 every 20 seconds or so.  Would be my guess, that a big chunk of those targetted will have big + tennis markets, or a similar sport (similar in the opportunities)..

Now these people, are able to nip in and out of the market for free.  Maybe trade 100 times, 10k profit, only pay 5%(max) in commission.

Now obviously I am making numbers up here, I don't know the best strategy, but this model seems much fairer to everybody for mine.

Obviously there would be some issues but I am sure they could be worked out.  Everybody has the same model, you can use that then however you like.  Take advantage of it and you are paying for it.
Then they could really say that the customer is getting charged for the costs involved, as the more active they are in the market, the more they pay.

Never thought I'd say this but I am starting to agree with Frog. I used to be against the PC but it is becoming clear that there are some players who have such a huge technical advantage, and who disproportionately drain Betfair's resources, that the idea that this is an exchange for punters vs punters has been completely lost.

cat, are you happy to be betting against betfair's bots?

This is my first post on the forum and probably my last as after the best part of 10 years I am reluctantly withdrawing my bank and moving to the purple site due to the latest big hike in pc charges.

A few thoughts on the PC charge and betfair in general:

1) There seems to be a fairly common theory on the forum that PC payers are cheats or taking an unfair advantage. Whilst I am one of the 500ish affected, my basic strategy is to back or lay one side of the market and then if im right I lay off the liability. I have never used a bot, specialised software, bet courtside  or had inside knowledge. Basically I use the same PC, broadband connecton and Sky feed as everyone else and use the exchange for what its intended for. There is, therefore, no unfair advantage here.

2) Maybe ive missed something, but I dont see how it benefits Betfair, the markets or non PC payers for traders/regular winners to be pushed into moving elsewhere. My main activity on a market is putting up unmatched backs or lays and laying off liabilities, therefore, I am doing my bit to create liquidity and stimulate matching activity. Betfair may believe that their brand, marketing or various site features draw people to the exchange but in reality all users care about is liquidity and website reliability. As long as it is worth their while operating here, regular traders will provide the liquidity which keeps people here and stops the competition growing. By pushing me elsewhere, Betfair lose my commission/20% PC and they lose the activity that my trading creates.

For the non PC customers who think it benefits them, how is the removal of successful traders going to improve their success rate?

I agree that courtsiders are utilising an unfair advantage so maybe new rules can be applied to profits on in running betting?

Ive never worked in the industry so I dont know the stats but I would imagine that the shelf life of new punters to all online gambling sites is relatively short so there is a constant need for heavy marketing spend by all companies to keep attracting new customers. This has nothing to do with or is a direct result of the activities of traders/regular winners. Up to now Betfair has a loyal customer base and consistent income stream from people who have been here for up to a decade. In my opinion, if Betfair continue to alienate winners they may end up with a customer base of sporadic punters and so the requirement to continually attract new customers increases signifcantly.

4) I dont think that its any coincidence that this increase coincides with BF full year results. The shares have almost halved since floating last October and still trade on a relatively high PE ratio so the management are under a lot of pressure to keep increasing earnings to justify this rating.

Ive never had a problem with the original PC charge (although i think it was farcical the way that it was calculated and then retrospectively deducted, i would rather have had a straight 20-25% commission deducted at source). It was mentioned previously on the forum that for every £1 made by a customer it cost BF 20p in costs. Obviously this isnt a good business model and so its not unreasonmable for the PC to uplift anyone under 20% into profit making territory. The problem is, the uplift to 40-60% is way too excessive. I spend a lot of time on my trading activity (as i mentioned before, its all me, no bot)and it isnt worth it for less than half of my current productivity.

Betfair have stated that their medium term EBITDA margin target is 30%. This to me is a reasonable rate to pitch commission + PC at.     

Good luck to everyone who decides to stay put. Whilst I dont agree with what they are doing, I dont intend to sl*g off Betfair as I accept that it's their perogative to run the business primarily in their shareholders interests.Unfortunately that conflicts with my interests as a customer so I am voting with my feet. Obviously the liquidity is a lot poorer elsewhere, but hopefully I and others will help to remedy that. Personally I am also looking at the longer term because as time goes by BF is moving further away from the exchange model which is an opportunity for the purple site to grow and fill the void.

iz77778
cat, are you happy to be betting against betfair's bots?

I'm happy if I'm making money .  I don't know if I would make more or less if betfair's bots weren't there although the only one I know of is the cross-matching one and I doubt that affects me much.

i echo that presidente, 5 star post rixy

@weatherman

Indeed there's a flaw, and I don't think I've seen it posted yet (though there is plenty of wood to lose this particular tree in!).

If the 480 move to another exchange, that exchange will gain 480 customers each accustomed to taking (at least) 25k pa of here.

If their move is a success that means they'll be taking circa £12m pa out of wherever they move to - and given nowhere else has the volumes available on BF, I can't see that new exchange providing those levels of takeout, or surviving the experience if it does.

For a 40%er the 25k/annum drops to 15k elsewhere,just 10k for a 60% payer.Still very hard to achieve,the good times are long gone.

The Rixy post perhaps clearly lllustrates that the hike in the PC is not going to solve anything.
He's not arguing about the need for everybody to pay a reasonable level of charges to GP, 20% seems to be commonly accepted now as being reasonable ( note it took the the introductoion of the PC for even that basic acceptance to come about).
He is saying that the recent " super tax " increase is unjustifiable and will simply result in throwing out the baby with the bathwater.
It's not going to stop the IT specialists who don't even gamble, as defined by traditional terms.
They will just earn less, but their time/reward ratio is so attractive that it probably matters nothing to them in reality.
They will probably get up off their fat, lazy butts and start to implement their IT driven strategies on the competitive exchange to try, if nothig else, to make up the expected shortfall in their earnings on BF. But they won't go away from BF and leave the exchange fairer and more evenly balanced for other punters.
As somebody else said, those days are probably well past and gone.
The question still remains as to how BF can stop the smart IT driven customers from driving the exchange to oblivion by bleeding the betting pool both too fast and too consistently.

I'd add a couple of points

1. BF only provides for its overall business and not the exchange. I know something about the costs associated with BF type internet businesses and I would be surprised if the operating margin (moreorless the same as EBITDA) on the exchange is significantly less than 80%.

That is, the exchange is massively profitable and everything else loses money.

2. People assume all bets on the exchange are retail. When in fact there is a high volume of wholesale bets (bookies laying off) in some markets (most of the ones I operate in). Much of the money made by big winners comes from taking these wholesale bets. Thats certainly the case with me

These wholesale bets will absolutely follow the liquidity.

fafh: The question still remains as to how BF can stop the smart IT driven customers from driving the exchange to oblivion by bleeding the betting pool both too fast and too consistently.

---------------

all very emotive and well and good, but as has been said several times - where is a single piece of evidence that this is/was happening?

viv, if it's not happening why are betfair so keen to risk all by taking a large slice of the action?

**** = 'who are' (BF thought I was talking about prostitutes there..)

Doesn't it stop anyone from doing that?

Pc reduces the slack