Deduction Factor

For our horseracing markets we guard against possible non-runners with a system of reduction factors (similar to Rule 4 with traditional bookmakers).

Each horse is allocated a reduction factor, based on its likely chance of winning the race. Should a horse be declared a non-runner, the reduction factor will be applied to the prices of all matched bets, for both backers and layers. This is to ensure that layers are not unfairly treated and exposed to large liabilities when the chances of other horses winning have improved. The reduction factors are designed to be fair to both backers and layers.

How is the reduction factor applied?

When a bet is struck, the price that it was matched at will be recorded on the system. If there is a subsequent withdrawal (non-runner), we will reduce the matched price by the reduction factor of the withdrawn horse.

If you want to calculate the new price once a reduction factor has been applied, this is how:

(Decimal odds / 100) x reduction factor of non-runner =  amount to reduce original price by

Subtract this amount from the original price to calculate the new price.

    Example Backer:
    - You matched a back bet on the horse 'Diamond Night' for £10 @ 8.6.
    - Your liability is £10.
    - A horse in the same race is now withdrawn with a reduction factor of 16.2%
    (8.6 / 100 ) x 16.2 = 1.39 (this gives the amount to be reduced from the original price)
    8.6 - 1.39 = 7.21 (this is the new price that you will be paid out if the horse wins.)
    Your new possible profit will be £62.10 (instead of £76 originally)

    Example Layer:
    - You matched a lay bet on the horse 'Diamond Night' for £10 @ 8.6.
    - Your liability is £76.
    - A horse in the same race is now withdrawn with a reduction factor of 16.2%
    (8.6 / 100 ) x 16.2 = 1.39 (this gives the amount to be reduced from the original price)
    8.6 - 1.39 = 7.21 (this is the new price to calculate your liability.)
    Your liability is reduced to £62.10 (instead of £76 originally).


Please note the following:

    If the reduction factor for a withdrawn horse is less than 2.5%, then the price reduction is not applied, as the horse was not really a material runner and if withdrawn, the difference to the betting would be negligible.
    The reduction factor work slightly different on 'Place' markets

thank you but this shows how the reduction factor is applied not how it is calculated.

I need to know how they get to the 16.2% as in this example.

https://en-betfair.custhelp.com/app/contact_us

Might be wrong, but have got a feeling it's 'classified'.
'A secret recipe'... (Bit like a master butcher's recipe for black pudding etc.)

Isn't it as simple as turning Betfair's Projected Betfair Starting Price into a percentage ?

(100 / Projected Betfair Starting Price) = Reduction factor

Doesn't appear so:

Reduction Factor      6.67%
Betting summary - Volume:      £195
Last price matched:      15.00
Projected Betfair Starting Price:      12.978715

Reduction Factor      6.67%
Betting summary - Volume:      £199
Last price matched:      15.50
Projected Betfair Starting Price:      14.759091

So the two variables there are Last price matched and book %

... and Betting Volume.

It is calculated roughly by 1/odds (eg in a 100% book of 3, 3, 3, when one is withdrawn the deduction factor is 1/3 so the remaining runners are priced 2 and 2 - there might be some averaging, but its irrelevant to the flaw in the system which is that it is calculated well before the off time (15 minutes?) and that means that a horse's price can be 3 when the deduction factor is set but the vast majority of trades are made after that and its average price might be much higher. 

Disclaimer: This might be bollocks but it accords with what I have read and observed

Or, indeed, might be much lower Dave.

yes that as well.  At least it's transparent the way it is, although they could be a lot quicker removing withdrawn horses.  I often wonder if the betfair bot is up to something sinister in these scenarios.

As if.