Well done Betfair: everyone is a £2 punter now.

But the bigger picture is much better, for one there is now not only the acceptance of big winners as the exchange model promotes the likely hood of, but also now a state of dependability
which means big winners can expect a stronger exchange to promote a bigger and better betfair with increased growth and where also betfair cannot ban the big winners as betfairs profits will shrink because of loss of liquidity and big winners premium payments.

One prospective concern about possible changes by betfair to the exchange mechanisms is creating
processes that are not con-current with the universally accepted role of a sporting exchange,
one being the seeding of markets whereby betfair is risking there own money against bettors
and another estrangement would be where bets are taken via sports books , again riskto betfairs personal assets would create an intolerance to big winners who will out play betfair
in the business of risk prosperity.

In my view making changes to a successful sporting exchanges mechanisms and charges should be something appointed to persons with better models of the combined effects of not only the fiscal implications and possible effects but also the customer confidence in using the said exchange,
one would hope these models and persons where up to the job.

Less money to bet into does not make for a stronger exchange. With Betfair's long term aim to replicate their risible multiples product on all markets, Betfair will be another bookmaker price on the board, but one that will be offering poorer prices with commission taken into account.

Re the safety of money, I think the recently emergent details of the way in which Betfair currently ringfences client money has put plenty of people off already.

I think the incorrect worries about concerns over ring fenced accounts has been resolved recently in the respective thread and also there a re-assurance of the protection of customers money in the customer pledge article, of course people will always worry its human nature but in time a logical understanding pervades to defeat this primitive emotion and betfairs handling of customers accouts has in my view been of the highest class of any betting site.

bff, I'm not worried about my money here, but to say the concern has been resolved for those worried is just stupid.
  The thread you refer to resulted only in a forum ban for the one most concerned.
  And the Betfair employee on that thread said they didn't want to reveal to us the mandate of investments of those funds.
  I can't think of any good reason for them to keep the investment mandate a secret to us.  After all, it's our money and we take all the risk, but Betfair is the benefitiar of any money made from those investment.

I think the incorrect worries about concerns over ring fenced accounts has been resolved recently in the respective thread

What a load of rubbish, who would have been reassured by that thread?

I read that thread, although when it became a slanging match I lost interest. The only 'information' I saw came from a forumite, I've yet to see anything directly from Betfair on this issue, unless there is something in the pledge on this, in which case I'd appreciate knowing where in the document this is as I haven't read it yet, and it is a significant issue for me.

Uou will find all the information relating to betfairs commitment to customers in https://promotions.betfair.com/customer-commitment/ and article 1.2 will assure all customers of there
money being quite safe and secure

I've just skimmed it, and to be honest it doesn't reassure me. It is quite opaque in terms of explaining exactly what the money is used for. I always assumed that client funds sat in a safe, low yield interest account with BF accruing the funds, yet the information within this document implies they can do what they want with the money, and there seems to be no apparent requirement to explain, if that is not what they mean, then that is the message gleaned.

The fact that a shortfall is even possible baffles me- how would it end up as less than sum client funds, unless something was being done with client funds? 15.2 would not reassure anyone with a big volume in their account, because the downside of that volume is much greater than having a small value in your account when settling in a proportional fashion.

Section 19 regarding liability is also a concern, I don't know enough about high finance, but how do you prove an investor is negligent as opposed to unskilled/honest poor business decision? Both can lose you a lot of money yet here only the first eventuality appears to be catered for.



4.3 Each Customer's interest in the Trust Fund is solely an interest in a cash amount equal to the Customer's Share of that Customer. For the avoidance of doubt, no Customer shall have any interest or right in any assets in which the Trust Fund is invested by the Trustee from time to time in exercise of its powers under clause 17 below.

8 Trust Expenses
The Trustee is entitled to deduct Trust Expenses from Interest and/or Other Amounts unless the Trustee decides to bear and does bear such costs, expenses and charges.

12.2 In the event that the value of the assets within the Trust Fund falls below the aggregate of the values of each Customer's Share (a Shortfall), the rights of the Company and the Group Companies to withdraw assets pursuant to clause 12.1 shall be suspended until such time as the Shortfall ceases to exist.


15 Distribution on Termination

15.1 Upon termination of the Trust, distributions shall be made out of the Trust Fund in the following order of priority:

(a) first, in providing for all actual or contingent liabilities of the Trustee in respect of the Trust;

(b) secondly, to each Customer up to an amount equal to the Customer's Share

(c) thirdly, to the Banks up to an amount equal to the Banks' Share; and

(d) fourthly, to the Company and to each Group Company up to an amount equal to the Company's Share or to the Group Company's Share respectively.

15.2 In the event of a shortfall of assets available for distribution to Customers, the Customers shall share in the shortfall in proportion to each of their shares in the Trust Fund.


15.3 In the event of a shortfall of assets available for distribution to the Company and to Group Companies, the Company and the Group Companies shall share in the shortfall in proportion to each of their shares in the Trust Fund.

15.4 In the event of a shortfall of assets available for the distribution to the Banks, the Banks shall share in the shortfall in such proportions and/or in such priority as shall be designated by written agreement between the Trustee on the one hand and the Banks' on the other hand. In the absence of any such agreement the Banks shall share available assets on a pro rata basis (i.e. equally in proportion to the sums due to them). Nothing in this Trust Deed entitles the Banks to any share of the Trust Fund that is in excess of that held on behalf of the Company and the Group Companies.

17 Additional Powers of Trustee

17.1 In addition to all the powers vested in trustees by law or statute the Trustee shall have the following powers and may exercise all or any of the same from time to time in such manner and to such extent as it shall think fit:

(a) power to invest the Trust Fund in any bank certificate, money market account, deposit account or in any other Investment;

19 Liability

19.1 The Trustee shall not be liable for any actions, claims, demands and proceedings brought or made against it or its delegates and all costs, damages, expenses or other liabilities of whatever nature in connection with this Deed or the Trust with the exception of claims and liabilities arising by reason of negligence, fraud or wilful default of the Trustee, its officers or employees.

19.2 The Trustee shall not be responsible for any misconduct on the part of any person appointed by it hereunder or be bound to supervise the proceedings or acts of any such persons.

19.3 The Trustee shall not be bound to give notice to any person of the execution of this Deed.

15.2 In the event of a shortfall of assets available for distribution to Customers, the Customers shall share in the shortfall in proportion to each of their shares in the Trust Fund.

Holy cow!!!

Punter: "Can I have my £500 now please?"
Betfair: "Congratulations.  Here is you pea."

Holy f*cking cow.

I figured like a bank account there would be a guaranteed protection of a set amount (85k), this suggests otherwise doesn't it.

betfair will become like the tote is ( not a tote, not a bookmakers, just a nothing)

Will they take 60% of the peanut that is left?

I like the throw the peanut in the air and catch it in my mouth.Don't know if I would bother if
they took most of that peanut that was left.Very worrying time.

My understanding is that Betfair now spread the client fund across several banks.  Which helps make the fund more safe in this current climate of possible bank failure due to sovereign default.  However, if one of the banks should fail then you may lose a proportion of your client funds.  Thats my understanding based on what I have read.  You probably wont get Betfair to confirm anything which remains hypothetical at the moment.

well, you probably wouldn't hazel, because in that scenario BF would use their cash pile rather than suffer the catastrophe of trying to continue trading while writing off a percentage of people's banks.

but the open question imo is the nature of the investments as much as the banks they're with. this money should be in AAA rated low yield bonds; there's no reason for it to be in anything else.

Exactly. We don't have the slightest idea what they're up to in this respect. How many banks is it spread across, which banks, what country, the nature of the investments (if that is what's happening) etc all need to be made transparent. The only name I've seen mentioned is RBS I think.

The amount ringfenced should be like a mirror of client funds only fluctuating on the basis of client deposits and withdrawals. The proportional approach to any haircut if they mess up is also a disincentive the larger your funds are. At the very least they need to come up with an amount that they can guarantee, if they can't do that, why not, what exactly is being done with the money that could make that impossible?

The fact that a shortfall is even possible baffles me- how would it end up as less than sum client funds...?

ICS,

As you appeared to acknowledge in your post of 17:44 and others have since stated, the collapse of one or more of the holding banks would be one of a number of unlikely situations under which a shortfall could occur.

In the event of such a shortfall, the proportional approach strikes me as by far the fairest method available for distributing the remaining client funds. What exactly would you propose instead of a proportional approach?

It is unrealistic to expect bf or any other bookmaker or exchange to issue an absolute guarantee. None of them are in any position to honour such a guarantee under all possible circumstances. Even the FSCS £85k guarantee could prove to be worthless under particularly extreme circumstances. Anybody under the impression otherwise is deluded.

When you say 'one of a number of...' what other situations do you have in mind to cause the discrepancy? Are we talking poor investment strategy of client funds for example?

Betfair should be looking to pass down all assurances they are afforded by the institutions with which they do business, and these should be made transparent at all times. I understand there is no such thing as an absolute guarantee, but in the first instance this should be the model they try and go with if only to let everyone know where they should stand.

If they say 'we will endeavour to protect your first 85k like the FSCS model' then we know the state of play. Without that, you have a situation where client money is less secure in Betfair than it is on our own current accounts. I've not seen anything on here acknowledging that so far.

By using a simple proportional model are you not penalising those who trust in Betfair the most? Personally I think the aim of a transparent FSCS type guarantee is a much better approach. Any surplus after that you might disperse proportionally, but I suspect someone will come up with something better than that if they thought about it.

On the basis of the statement it seems at present Betfair has the option to invest client funds wherever it wants, not pay any kind of dividend on profits it makes, avoid responsibility for misguided (as long as not negligent) investments, and expect clients to pay for the privilege if anything goes wrong.

ics - it was a convoluted thread, but somewhere in it I made a similar point. essentially, there's a conflict of interest, in that BF get all the interest, the interest shows on their bottom line, and the bottom line affects the share value.

and, if profits start to fall, there's a potential for that conflict of interest to be exacerbated, as the contribution of interest on client funds to total profits would likely become proportionally greater. so the whole thing becomes kind of leveraged.

I'm not massively worried about it - I think it's all pretty much latent conflict of interest as things stand - but I definitely don't think it was sufficiently dealt with in that thread.

I believe that fraud and poor investments were suggested as alternative reasons as to how a shortfall could theoretically occur in an earlier thread. I would hope that both of these are even less likely than the collapse of a holding bank which results in the loss of depositors funds.

I'm not convinced that BF is in any position to offer an £85k guarantee to each client similar to that of FSCS (which is backed by the government). I suspect that funds held in a personal bank account covered by the FSCS guarantee are more secure than those held with bf or any other bookmaker. I believe that most clients would reach the same conclusion.

With regard to the FSCS £85k guarantee and proportionality, I would note that it protects a greater proportion of funds for those with total funds that fall within the combined limit than those with funds that exceed the limit.

Ignoring joint accounts, I believe that the protection offered is up to £85k per person per banking group. If for convenience it is presumed that there are 10 covered banking groups, someone with savings of £850k or less could have all their funds protected under the scheme whereas someone with savings of £8.5 million could cover only a 1/10 of their funds.

You appear to be seeking greater protection for those who hold large balances at bf at the expense of those who hold lower amounts. This strikes me as unreasonable. The bf proportional model of distribution in the event of any shortfall is in fact nominally fairer to those who hold large balances than the FSCS guarantee.

I too would welcome greater openness with regard to the type of investments made and the institutions in which client funds are held.

I wouldn't expect a guarantee of 85k, but some figure to work with would be helpful.

I disagree with the idea that smaller accounts would be penalised with a threshold- the point of the threshold is that they would get 100% up to that point, which is more than they would get under any pure proportional model. If anything, larger accounts will get slightly less as the difference between the pure proportional model and threshold for every account under the threshold is made up. The key thing though, is that these large account holders would have been empowered with some sort of transparency to help decide how much they could trust to a Betfair account by Betfair specifying an intended threshold.

The problem is of course, transparency is anathema to Betfair 2011, so instead we're left to second guess what is going on and try and piece together their actions, aided by the corporate fluff they actually do release to us, and that which leaks out into the media. I find it very difficult to trust this organisation.